Foreign business groups in China wary as new Xi term begins

6:25 am Monday, October 24th, 2022

By Josh Horwitz

SHANGHAI (Reuters) – Overseas business groups in China expressed on Monday wariness about President’s Xi Jinping’s newly unveiled leadership team and his stated priorities, with some urging against greater state intervention in the market.

Eric Zheng, president of the American Chamber of Commerce in Shanghai, told Reuters the chamber was “encouraged” by a commitment to deepening reform and opening up expressed in Xi’s speech at a Communist Party Congress that concluded on Sunday.

“However, at a time when China’s economy faces a challenging environment, we are concerned that the use of non-market tools such as government subsidies to support the state sector could be counterproductive,” he said.

Xi secured a precedent-breaking third leadership term on Sunday and introduced a new Politburo Standing Committee stacked with loyalists, triggering a sharp slump in mainland and Hong Kong stocks as investors sold on fears that economic growth would be sacrificed for ideology-driven policies.

The European Union Chamber of Commerce in China said in a statement it was taking a “wait-and-see” approach to the impact of the Congress as major policy announcements would likely not surface until March 2023, when the party convenes for annual meetings known as the “two sessions.”

While the European business group was positive on remarks Xi made on environmental protection, it said it wanted more clarity on how China planned to remain committed to reform and opening up but also how it would “stay independent and self-reliant”.

“It is not clear how these two statements can be reconciled in practice,” it said.

Steve Lynch, managing director of the British Chamber of Commerce in China, said that while the remarks at the congress pointed to some continuity with the past, the chamber had seen “considerable shifts” in certain policies, and it had to wait to see how they would be implemented.

Overseas businesses in China have grown increasingly critical of policies such as a tough zero-tolerance stance on COVID-19, which they say is discouraging investment and preventing them from attracting foreign staff.

(Reporting by Josh Horwitz; Editing by Robert Birsel)