China, a mecca for foreign investment just a few years ago, is struggling to court international investors as its economy loses stream.
The country recorded a 30-year-low of $33 billion last year in direct investment liabilities, a measure of financial inflows tied to foreign-owned entities, according to data released earlier this month by China's State Administration of Foreign Exchange.
China has been beset by deflationary pressures, a property market crisis, high youth unemployment and a stagnant manufacturing sector. The widening gap between the world's first- and second-largest economies has raised questions about whether China can still hope to overtake the U.S. in the near future.
The Chinese Foreign Ministry was contacted by Newsweek in an emailed request for comment.
U.S. Ambassador to China Nicholas Burns said the wide-ranging anti-espionage law China has used to target companies is further spooking foreign investors.
"More money is leaving China or the first time in 40 years than is coming in from American, Japanese, European, Korean investors," Burns told CBS News in an interview broadcast Sunday.
He said the Chinese government is sending conflicting messages to the rest of the world. "On the one hand, they say, 'We're open for business. We want American, Japanese businesses here.' But, on the other hand, they've raided six or seven American businesses since last March."
Burns added: "They've gone into American companies and shut them down and made accusations we believe are very much unwarranted."
The diplomat was referring to raids in 2023—such as those targeting the Shanghai office of management consulting firm Bain & Co. and the Beijing office of the Mintz Group, a due diligence investigator, among other companies—after China introduced revisions to its anti-espionage law. Five Chinese employees of the Mintz Group were detained.
Last August, the U.S. State Department voiced concern that the legislation "greatly expands the scope of what activities are considered espionage" and raised the risk of arbitrary arrest.
"You know, I think they want to control data about the Chinese people, about Chinese companies. And so that, I think, is at the heart of the problem with those American companies operating in that sphere," Burns said when asked why China would take action against due diligence companies in particular.
He cited fear of intellectual property theft as another factor causing foreign companies to think twice about investing in China.
Last October, Australian intelligence director Mike Burgess said Beijing was carrying out "the most sustained, scaled and sophisticated theft of intellectual property and theft of expertise in history."
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Micah McCartney is a reporter for Newsweek based in Taipei, Taiwan. He covers U.S.-China relations, East Asian and Southeast Asian ... Read more
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