The American Chamber of Commerce in Shanghai recently released a report saying that the lockdown in Shanghai caused almost all US companies to lower their revenue forecasts. 25% of local US companies have cut back on their investment. Besides, Chinese regulators have warned foreign banks not to be “too generous” with senior executives. This policy some analysts warn will speed up the fleeing of foreign capital.
On the same day, China Premier Li Keqiang gave a speech focusing on stabilizing the economy, private investment. Some analysts said Beijing was trying to stabilize private capital to help boost the struggling economy.
AmCham Shanghai report: 25% of US companies cut back investment
According to a recent survey report released by the American Chamber of Commerce Shanghai, 93% of the surveyed companies have lowered their revenue forecast. Specifically, 25% of the surveyed companies expect revenue to be more than 20% lower than expected; while this figure reaches 36% for consumer and service companies.
According to the report, 25% of consumer and services companies and 20% of manufacturing companies have decreased their investment plans. Just one respondent plans to increase their investment in China.
About 26% of manufacturers are ramping up the localization of their China supply chains while moving production of global products abroad.
The survey was taken for 133 companies to gauge the impact of China’s lockdown measure on their business.
Eric Zheng, president of the American Chamber of Commerce in Shanghai, said the lockdown impact on businesses was far-reaching.
Besides, according to a report by Bloomberg on Monday, China Securities Regulatory Commission held a meeting with several foreign banks, asking them not to overpay high-level executives. Excessive executive compensation is not in line with the common prosperity policy. Some analysts said this will also speed up the fleeing of foreign capital.
The foreign banks involved are Credit Suisse, Goldman Sachs and UBS.
This might have consequences. Wu Jianzhong 吴建忠, an associate professor at Taipei University of Ocean Science and Technology, told Radio Free Asia:
“If we want to implement ‘common prosperity’ now, foreign capital may face very big problems in keeping or attracting talents. This may cause foreign capital to leave the Chinese mainland market at an accelerated rate.”
In a meeting of the State Council on Wednesday, China Premier Li Keqiang put emphasis on economic stabilization and further supported private investment in three aspects.
In this regard, current affairs commentator Wang He told Chinese media Da Ji Yuan that private investment only accounts for more than half of the total social investment, and one can imagine how bad the Chinese economy is. The government is clearly trying to stabilize private capital and help boost the private sector during this period.
He said, “The CCP’s political situation has turned to the left. Tycoons have been attacked. The economy has declined, and measures such as city lockdown have directly caused a devastating blow to the economy. Coupled with the international economic turmoil, China’s private capital has little way out, so it’s either fleeing or watching. Not many are engaged in industry and long-term investment. In fact, this is private capital’ voting with its [escaping] feet’.”
Wang He said, “The subject of Li Keqiang’s meeting is to support private investment because it is imminent to stabilize the economic market. However, it can also be seen that the CCP’s political trend is bad.”
He continued, “Li Keqiang’s three measures are just to squeeze the flesh out of the mouths of state-owned enterprises and the government and give out a little to private capital. Give the private economy a little space, let it grow up, and survive the current hard time. After [these private companies] grow up in the future, and now the fish has been fattened, then if you clean it up again, (the CCP) will get more in return.”
Wang He said that Chen Yun, a veteran Chinese leader during the Deng Xiaoping era, called China’s economy the “birdcage economy.” For China’s economy to find a way out, this cage must be dismantled.