Strained relations between Washington and Beijing appear to be stabilizing, a shift that is stirring renewed business interest in China among U.S. companies, a former long-term U.S. diplomat who is the current chairman of the American Chamber of Commerce in Shanghai told Forbes on Tuesday.
“There are some positive signs in the relationship, particularly the high-level contact among the two countries’ economic officials,” said Sean Stein in Beijing via Zoom.
After a rough 2022, investment interest is “slowly returning to historic norms,” said Stein, who spent more than two decades in the U.S. foreign service before joining American law firm Covington as a public policy practice advisor in Shanghai in 2021. That advance, however, is constrained by continuing concerns about security issues and the economic outlook, he added.
The atmospherics of the U.S.-China economic relationship have improved following a series of high-level government meetings between the two countries. Daniel Kritenbrink, U.S. Assistant Secretary of State for East Asian and Pacific Affairs, and China’s Vice Foreign Minister Ma Zhaoxu held meetings on June 5 that both said were productive. China’s Commerce Minister Wang Wentao met U.S. Commerce Secretary Gina Raimondo in Washington last month followed by a meeting with U.S. Trade Representative Katherine Tai in Detroit on the margins of an APEC trade gathering. Those meetings followed talks in May between U.S. National Security Advisor Jake Sullivan with Chinese Communist Party Politburo Member and Director of the Office of the Foreign Affairs Commission Wang Yi in Vienna.
The meetings are among the latest twists in months of volatility in U.S.-China ties. Tension soared after a Taiwan visit by then U.S. House of Representatives Speaker Nancy Pelosi last August prompted China to cut back official contacts with the United States and to launch military drills around the island. In November, a meeting between U.S. President Joe Biden and China President Xi Jinping in Bali led to expectations the relationship between the two countries was going to stabilize.
Relations plunged again, however, after an alleged spy balloon from China floated over the U.S. heartland in February, and China later targeted several U.S. companies in the mainland, including due diligence firm Mintz Group and Micron Technology.
Following the visit to Beijing by Kritenbrink on Monday, CNN reported yesterday that U.S Secretary of State Antony Blinken “ is expected to travel to China in the coming weeks.” Geopolitical tension, notably over Taiwan, remains.
Where does all of that leave American businesses?
“Last year in the foreign business community, there were record high levels of pessimism and very low levels of optimism. That is now recovering,” Stein said.
However, he continued, the rebound is still limited by uncertainty about China’s economic recovery, as well as concerns about the ability to conduct due diligence and obtain reliable economic information about China.
American companies have been further worried by government actions against some U.S. firms and a recently passed national security law which can be interpreted as criminalizing certain routine business activities such as conducting due diligence and market research.
“We are actively encouraging the Chinese government to communicate with foreign businesses about where the red lines are so firms can collect the information they need to make informed investment decisions and manage risk while complying with Chinese law,” Stein said.
“In addition, American companies are still waiting, watching, and doing their homework before they really start resuming investment into China,” he said.
Many foreign companies in China shelved investment plans during the pandemic in 2020-2022 when corporate leaders couldn’t visit and businesses faced uncertainty due to lockdowns and travel restrictions. “Rebuilding investment pipelines and identifying suitable projects and investments takes time. That’s not something that happens instantly, especially for big projects,” Stein noted.
China, eager to show off foreign business confidence in the country, received in a boost this month with a visit by Tesla CEO Elon Musk and a high-profile attendance at a conference in Shanghai by JPMorgan CEO Jamie Dimon.
“The foreign business community is hoping for stronger economic performance in the second half of the year,” Stein said. “If we see more Chinese consumer spending, that will help. If we see a government stimulus program targeting households, that will help. If we see more investment by China’s private sector, that will help. Companies were encouraged by how much travel we saw over the May holidays, but we need to see signals like that continue into the second half of the year.”
In particular, foreign investors are keeping an eye on the actions of China’s private sector. “According to the statistics, investment by China’s own private sector remains depressed,” Stein said.
“Foreign investors are watching this closely. Greater optimism and investment by Chinese companies will translate into more investment and more optimism by foreign companies,” he said.
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