Play Live Radio
Next Up:
0:00
0:00
0:00 0:00
Available On Air Stations
Underwriter Message

The mixed message about China's economy

JUANA SUMMERS, HOST:

China's premier spoke this week at the World Economic Forum in Davos, Switzerland, saying the Chinese economy is doing just fine and making a pitch to international investors that China is open for business. But as NPR's John Ruwitch reports, other signals out of Beijing have been conveying a different message.

JOHN RUWITCH, BYLINE: As premier, it's Li Qiang's job to talk up the economy. Here he is speaking through an interpreter at Davos.

(SOUNDBITE OF ARCHIVED RECORDING)

LI QIANG: (Through interpreter) In the past five years, the return on foreign investment, foreign direct investment in China stands at around 9%, which is quite competitive globally. So I always say that choosing the Chinese market is not a risk but an opportunity.

RUWITCH: But Li's message stands in contrast to what his boss seems to be focused on.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT XI JINPING: (Speaking Mandarin).

RUWITCH: That's Chinese leader Xi Jinping speaking at Parliament last year. Security is the foundation for development, he says. Stability is a prerequisite for prosperity. Sheena Chestnut Greitens is a China expert at the University of Texas, Austin.

SHEENA CHESTNUT GREITENS: So I think that the idea that economic growth created the basis for stability for the Chinese Communist Party was the conventional wisdom, and I think that was the conventional wisdom until pretty recently. So he's actually inverted the cause and effect in that relationship.

RUWITCH: And that's meant the economy is increasingly seen through the lens of security. That's had a noticeable effect, according to Dan Rosen, a partner at the Rhodium Group, an economic research firm.

DAN ROSEN: A year ago, virtually all of the CEOs and senior executives that we speak to at Rhodium Group believed that by the end of the year, China as they knew it was going to be back.

RUWITCH: The country's draconian COVID rules were in the rearview mirror, and everyone expected the economy to rev back up. But it didn't.

ROSEN: By December 31, or really by the fall of 2023, I'd say 100% of the CEOs felt differently.

RUWITCH: Not only were the authorities not taking strong enough measures to revive the economy, some thought. They were doing other things that made businesses nervous. Those include the rollout of tough rules on data security and revisions to an anti-espionage law that limit the kind of information that companies can collect in China. There have been raids on a handful of Western consultancies, and the authorities have intensified a campaign to root out spies.

Business confidence has suffered. A survey by the European Chamber of Commerce in China a few months ago showed that two-thirds of its members said it had become harder to do business in China over the prior year. Three in five said they were losing business opportunities because of red tape or regulation. Foreign direct investment in particular has fallen off a cliff.

LING CHEN: Basically, China is facing a dilemma.

RUWITCH: Ling Chen is an assistant professor at Johns Hopkins School of Advanced International Studies in Washington, D.C.

CHEN: They need to promote economic growth, on the one hand, and also emphasize the securitization of the economy, on the other hand.

RUWITCH: Balancing that has been tough. Different agencies have sent out conflicting signals. The usually secretive Ministry of State Security, for instance, has recently become vocal about the economy. Chen says the contradictions show that the authorities are responding to internal pressure as the economy slows and external pressure as trade and political frictions with the U.S. and others grow.

CHEN: They, first of all, have to prioritize survival before they talk about other things like diversifying the economy.

RUWITCH: But it's a catch-22. At some point, analysts say, survival also requires a dynamic economy. And there have been recent signs that the government is aware of that fact. They've been ramping up steps to support growth. And in August, the authorities issued a list of 24 measures to stabilize foreign investment. Jens Eskelund, president of the European Chamber of Commerce in China, says that's welcome, but it raises a question.

JENS ESKELUND: What we ask ourself is whether this is just a tactical play until China is doing better economically and has become more self-reliant or is it an expression of a real shift in attitude?

RUWITCH: A tactical play or a real shift in attitude? He says people he's talked to who've been in China a while tend to be on the cynical side.

John Ruwitch, NPR News.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

John Ruwitch is a correspondent with NPR's international desk. He covers Chinese affairs.