Xi Administration Desperate to Halt Corporate Exodus

By Miyuki Yoshioka / Yomiuri Shimbun Correspondent

2:00 JST, January 17, 2023

GUANGZHOU, China — The administration of Chinese President Xi Jinping has grown increasingly wary of moves by foreign companies to exit China.

Last December, a senior official at a Japanese-affiliated business organization was contacted by a local government official who said, “If there is anything we can do, please don’t hesitate to tell us.” Such a modest approach came as a surprise, but the local government apparently wants to keep as many foreign companies in China as possible by improving the business environment.

The government-affiliated newspaper Economic Daily warned against market withdrawals by foreign businesses in an opinion article published this month, saying that China is closely tied to the global economy, and a decoupling by the United States would cause the country’s own companies and economy to suffer.

China’s economy has continued to stagnate in the wake of a pandemic-driven lockdown of Shanghai last spring, with a surge in infections since November now further weighing down activity. Economic growth for 2022 is expected to have fallen far short of the government target of around 5.5%. The country has also seen its unemployment rate remain high, in the 5% range. If jobs are lost due to market withdrawals and factory relocations, it could shake social stability, which is prized as the foundation of one-party rule.

On the other hand, China boasts a huge market with a population of 1.4 billion and the strong purchasing power of its middle- and upper-classes — attractive prospects that would give pause to any foreign company mulling an exit.

In 2021, clothing giants Nike, Inc. and H&M Group were boycotted in China. The snub came after the companies stopped using cotton grown in the Xinjiang Uyghur Autonomous Region over allegations of forced labor. In the past, boycotts have also targeted iPhones, for which China accounts for 20% of global sales.

At the National People’s Congress in March this year, Li Qiang, a close ally of Xi, is expected to assume the post of Chinese premier in charge of the economy. Some Japanese companies have been cautious about the growing corporate trend toward leaving China, with one company executive saying, “We should wait and see what economic policies will come out at the National People’s Congress before making a decision on our future investment in China.”