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China’s Relationship with Foreign Businesses: A Closed-Door Policy

Sep 26, 2014 |

This week, Distinguished Scholar Dr. Joshua Eisenman published an article in Foreign Affairs, “Closed Door Policy,” which analyzes China’s increasing hostility toward international firms operating within its territory. Some of Beijing’s punative actions toward foreign firms include costly fines, denying mergers, refusing applications for licenses, and detaining and deporting managers—all of which have contributed to a 14 percent fall in foreign direct investment in China over the past year. Although resistance to foreign firms is not new, Eisenman states that recent policies seem to counter the official Chinese position of “economic openness” promoted by Liu He, President Xi Jinping’s chief economic advisor.

According to Eisenman, this tense economic climate may have repercussions in the U.S.-China political relationship more broadly, with U.S. firms in China becoming less willing “to publicly support China-friendly policies in Washington.” It may also have an impact in China domestically, as Xi’s efforts to break up vested interests could be threatened. By focusing attention on the crackdown of foreign businesses, domestic firms are able to continue avoiding public scrutiny and accountability. If policies of “economic reform without opening up” continue, says Eisenman, China risks alienating not only foreign firms and governments, but local party members as well.

The article can be found here in full.

 

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