China's rosy growth is being watched with dubious eyes as foreign interests remain weak and cautious

However, the declaration largely failed to prevent a loss of confidence – be it among foreign businesses, private entrepreneurs or domestic consumers.

Across China, a large swath of foreign companies are grappling with the gap between their weak business results and Beijing's rosy economic record.

“The recovery is still shaky” as China tries to put the economy on solid footing in 2024

Instead, challenges related to national security, data flows and persistent market barriers dominate hearts and minds, fueling doubts about increasing investment in China and considerations about exploring opportunities abroad.

“The economic downturn continues to be a major concern for our member companies,” Eric Zheng, president of the American Chamber of Commerce in Shanghai, said Tuesday after announcing 5.2 percent growth.

His latest assessment reflects the “reservations” expressed in AmCham polls last yearas a large number of respondents said that the economic downturn in China appeared to be the biggest challenge for their company in the coming years.

He also highlighted the existence of “skepticism” about the accuracy of China's official statistics, but acknowledged that “China could still be on the path to recovery from the Covid nadir despite serious headwinds such as the struggling real estate sector and waning confidence.”

“A comprehensive economic recovery policy toolkit is critical to boosting American companies’ confidence in China,” Zheng said.

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China's GDP: Beijing's long to-do list to boost its economy in 2024

China's GDP: Beijing's long to-do list to boost its economy in 2024

Meanwhile, many foreign investors say they are finding it difficult to make money or grow their business in China, especially since the opportunities have long favored their state-owned rivals.

The state media even went so far as to call the problem “ hidden barriers“The crisis faced last year was the difficult private sector, which hampered the operations and success of private companies.

For example, foreign-invested companies in Hong Kong, Macau and Taiwan recorded a dismal annual industrial production growth of 1.4 percent last year, in contrast to 5 percent growth in state-owned enterprises, according to the National Bureau of Statistics data.

While the 1.4 percent figure is partly due to a shrinking industrial presence of foreign players with capacity shifting to cheaper locations or home countries, it also quantifies declining levels of trust and growing unease.

Discussion over China's economic prospects intensified last summer, fueling debate over whether the country remained investable, particularly as trade tensions with the United States intensified.

Given the punitive tariffs that Washington has imposed on Chinese goods since 2018 and new technology restrictions, many foreign manufacturers have shifted production or considered a Plan B.

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In the third quarter of last year, China also recorded its first deficit since 1998 in direct investment liabilities – a broad measure of foreign direct investment (FDI) that includes the retained profits of foreign companies in the country. The State Administration of Foreign Exchange said the deficit reached $11.8 billion in the July-September period.

“We are much less interested in the actual GDP number – whether it is 4.2, 5.2 or 6.2 [per cent] – when we were interested in the composition,” said a China-based European investor who spoke on condition of anonymity because of the sensitivity of the matter. “What we would really like to see is growth in the consumption share of GDP. And unfortunately that’s not good.”

There also appears to be a growing belief among foreign companies, particularly those with a strong presence in China, that they need to hedge against the Chinese slowdown and geopolitical risks.

“[They are] Consider whether it would be better for them to place some of their investments – with some diversification – outside of China. I think we’re seeing a real bottleneck,” the source said.

The year 2024 could be difficult as demand cannot withstand… Yang Yeqing

Many foreign companies now conduct their own assessments of the Chinese economy, based not only on publicly available government data but also on high-profile industry figures and rumors.

Yang Yeqing, marketing and sales manager at the Shanghai office of a Japanese robotics company, said they are paying more attention to fixed investment figures and trade data.

The maker of industrial robots for the automotive and building materials industries also had no plans to expand in China this year due to a slowdown in some business areas.

“We expect that 2024 could be difficult as demand, including exports, is not holding up well, as we can see from these data and statistics,” he said.

China's real estate investment fell 9.6 percent in 2023, while total exports fell 4.6 percent. One bright spot, however, was car sales, which rose 5.6 percent last year, official data showed.

Tomoo Marukawa, a professor specializing in Chinese economics at the University of Tokyo, said China's 5.2 percent annual growth is within the realm of possibility.

“Given the low growth base in 2022 – 3 percent – I think last year’s growth rate is credible,” said the economist, who is also a visiting scholar at Tsinghua University in Beijing. “But China could have done better.”

Marukawa said this reflected the real situation – that of a bumpy, uneven recovery across numerous sectors.

Largely due to the pandemic and related measures in recent years, the Chinese economy experienced dramatic fluctuations in its annual growth, starting with negative growth in the first quarter of 2020, which contributed to the annual growth rate falling to 2.2 percent and subsequently to 8.4 percent fell by 3 percent in 2021, by 3 percent in 2022 and by 5.2 percent in 2023.

For some foreign investors, China remains a promising investment location despite headwinds such as uncertainties over jobs and incomes. Some point to the presence of the world's largest consumer goods market, supported by a 400 million-strong middle class, even if this is the case The middle income group is in danger of shrinking.

Last year, US retail giant Costco reportedly considered various factors – from per capita disposable income to luxury car sales – when deciding where to establish a foothold in China.

According to Zhejiang media, Costco's China team in Zhejiang province is said to have evaluated a variety of data disseminated by provincial officials in charge of promoting foreign investment. And the American company reportedly commissioned independent surveys of local consumer sentiment before choosing Ningbo and Hangzhou – the two largest cities in the eastern economic hub – to open Costco's fourth and fifth major retail stores in the country.

China's nationwide per capita income was 39,218 yuan (US$5,525) in 2023, while the corresponding figures in Ningbo and Hangzhou were over 80,000 yuan (US$11,270).

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According to Richard Zhang, president of Costco Asia, Costco currently operates six stores in Shanghai, Suzhou, Ningbo, Hangzhou and Shenzhen – all relatively wealthy cities – while two others, Nanjing and Guangzhou, were on the expansion radar for this year.

“China remains a key focus and we will use the performance of the first stores in Shanghai and other selected cities as a benchmark to assess whether we penetrate deeper into the Chinese market,” Zhang was quoted as saying by Shanghai media last year.

Alex Ma, assistant professor at Peking University's School of Governance, discussed how geopolitical and macroeconomic factors influence foreign investors' interpretation of China's economic prospects.

“China needs to do more,” he told the Post. “It has to go beyond reporting nice economic data. It is of great importance to attract and retain foreign investment [in terms of] the transfer and acquisition of foreign technologies and management skills.”

Amid ongoing challenges for foreign companies and weakening ties with the West, China's foreign investment revenue fell 8 percent on an annual basis to 1.13 trillion yuan last year. But the Commerce Ministry has not yet released the U.S. dollar value because it is believed to have fallen more due to the yuan's devaluation.

Foreign investment accounts for just 0.9 percent of national GDP, well below the average of 2 percent over the last decade.

Still, Ma said foreign companies and investment have had an outsized positive impact on China's industrial and consumption improvements.

During his speech in Davos, Prime Minister Li said the return on foreign direct investment in China has been around 9 percent over the past five years, calling the country “quite competitive globally.”

Li also pledged to “work tirelessly” to promote a market-oriented, law-based and world-class business environment, expand institutional opening, remove entry restrictions and shorten the so-called negative list, which lists the areas where the government prohibits or restricts foreign investment.

“We will also regularly listen to the views of foreign companies and take active steps to address reasonable concerns,” Li promised.

The impact of such promises will certainly be closely watched and scrutinized by those with a vested interest in China's economic recovery.