Overly optimistic data extended to foreign direct investment (FDI), where Ministry of Commerce (MOFCOM) numbers for H1 told a tale of record FDI inflows into China, the opposite of what FDI indi- cators from alternative sources show. Only in January did Beijing revise the country’s post-reopening death toll from several dozen to nearly 79,000, which epidemiologists still consider an underestimate. Chinese authorities grossly underreported COVID-19-related deaths for weeks after scrapping the zero-COVID policy, which led to global criticism and concern from the World Health Organization regarding Lunar New Year travel risks. The National Bureau of Statistics (NBS) delayed its release of standard economic data- including Q3 gross domestic product (GDP) data-until after the conclusion of the Party Congress, most likely to prevent weak numbers from dampening the positive message the Congress delivered. Authorities exaggerated China’s economic strength while suppressing information on the spread of COVID-19. The concession by Chinese authorities averted the risk of forced delisting of around 200 Chinese firms from US exchanges, suggesting Chinese leaders are, at least in some ways, trying to limit decoupling.Īt the same time, the government’s record on data transparency-a key problem for investor confidence-remains dismal. This development aligns China’s auditing processes for its US-listed companies with US auditing standards, though the PCAOB still has to report the results of its assessment of each company’s accounting practices. So far, the main positive signal was the announcement by the US Public Company Accounting Oversight Board (PCAOB) that it had received complete access to inspect registered public accounting firms in mainland China and Hong Kong. However, it remains to be seen if the rhetoric will be matched by action. In a speech to the Central Economic Work Conference (CEWC) in December, President Xi said it was “incorrect” that China had become unfriendly to foreign investment. President Xi and Vice Premier Hu Chunhua drove home a similar message, calling for practical measures to attract foreign capital. In the investment domain, the Chinese government released a flurry of policies, which ranged from easing rules for foreign bond investors to promoting direct investment in high-tech, manufacturing, and certain service industries. Policy activity in H2 2022 was dominated by measures to offset the economic slowdown and reassure foreign investors. So far, evidence of a more meaningful commitment to structural reform is hard to find. The defining question of 2023 will be whether the shift in policy and rhetoric is merely a short-term tactic by the Chinese government to shore up growth. In recent months, Chinese officials have been reassuring a private sector hammered by regulatory crackdowns and rolling out the welcome mat for foreign investors who have been turned off by years of draconian COVID lockdowns. Nevertheless, China’s economic weakness is pushing leadership to strike a more business-friendly tone. Throughout, the Chinese government has continued to claim that the path it has chosen for China’s economy and its people is the only right one. Two months later, the chaotic abandonment of zero-COVID measures, in place for nearly three years, triggered a nationwide health crisis. In October, President Xi Jinping was elevated to an unprecedented third term, underscoring his iron grip on China’s Communist Party and the country. In the second half of 2022, China veered from one extreme to the other, with carefully choreographed control followed by sudden turmoil. To explore our inaugural data visualization and read our annual report and updates, please visit the China Pathfinder site. China Pathfinder is a multi-year initiative from the Atlantic Council’s GeoEconomics Center and Rhodium Group to measure China’s system relative to advanced market economies in six areas: financial system development, market competition, modern innovation system, trade openness, direct investment openness, and portfolio investment openness.
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