In 1979, China opened its country as a free market economy. This caused many Western and other large companies to move to China in the early 1980s. The influx of companies in tandem with the population increase caused China’s economy to boom and become the second-largest economy in the world.
Due to recent events between the U.S. and China, China has become weary of U.S.-based companies in China. According to Nicholas Burns, the U.S. ambassador in China, over six companies have been raided by the Chinese authorities since March of last year. Due to these events, foreign companies and investors have been wary of the government is direction. One of the companies that was raided was Bain & Company, one of the biggest consulting firms in the world. Another firm, Capvision, was also raided, and a report about it was even broadcast on state-run television. The reason for China raiding these companies is the accusation that these firms are obtaining military secrets, assisting in espionage, and stealing national security information.
Since Xi Jinping’s leadership in 2012, many reforms causing China’s growth have been reversed. Burns has also commented that reversing these reforms has caused China to lose more than $120 billion in “long-term foreign investments” because of the weakening economy. The regulations that previously gave the U.S. and other foreign companies a favorable advantage are being reversed, and in their place are stricter laws on foreign companies. Jinping intends to hold more control over the domestic market and reduce China’s need for foreign assistance. This will allow China to be more self-sufficient and reduce reliance on the United States and other countries.
Although foreign companies risk being shut down, most stay because of the expansive consumer market. The potential consumer market is enticing due to the unstable government and the changes. Due to this, most foreign companies, when choosing to stay in China, do not invest. COVID-19 and the declining birth rate have significantly slowed the Chinese economy. Additionally, the rising tensions between China and various other countries over the ownership of the South China Sea have led to many investors and companies feeling unsure of China’s future.
The economic state have undergone significant changes since the initial revisions on the market in 1979. Tensions between China and various countries will continue to intensify as time goes on. Foreign companies are still determining the future of China and have been carefully assessing the economy’s future. As China aims towards a self-sufficient economy, the global impact of these changes will still be uncertain.
