“Decoupling” is not even in Elon Musk’s vocabulary.
Musk met with Chinese leaders yesterday to discuss expanding Tesla’s presence in the country and emphasize the importance of US-China relationships. But Musk is as ever the contrarian as more and more Western investors retreat from China.
Stuck on You
In 2022, strict border controls and covid lockdowns continued to impede foreign investors looking to do business in China. Nikkei reported that foreign direct investment into China totaled just $42.5 billion between July and December 2022, a 73% decline on the year and the sharpest drop since 1999. But once China did away with its zero-covid policy, FDI bounced back, slightly. The Ministry of Commerce reported nearly $58 billion in foreign investment for the first quarter of 2023, a roughly 6% increase from last year’s historic drought.
Still, Beijing and DC continue to pour hundreds of billions of dollars into industries like electric vehicles, microchips, and energy in their respective countries, both boasting they’re well on their separate ways to if not self-sufficiency than at least being less reliant on each other. To Musk, that’s not an option. During his meeting with China’s Foreign Minister Qin Gang, Musk described the US and China as “conjoined twins,” according to statements from the ministry. And with Tesla developing a new “Megapack” factory in Shanghai, Musk would like to see the two nations do a better job of working things out.
Yet, in a time filled with spy balloon shenanigans, supply chain disruptions, intense oversight, and cut-throat competition, many Western institutions are thinking twice about China:
- During a private equity conference in Hong Kong on Tuesday, Goldman Sachs’ Asia-Pacific asset manager, Stephanie Hui, said she doesn’t conduct any fundraising in the US anymore. A spokesperson for the bank told the Financial Times that Hui was referring to North American investors’ wariness about pouring money into Chinese ventures and businesses as political and economic tensions mount.
- According to a recent American Chamber of Commerce in China survey, 2023 marks the first time in 25 years that China is not a top three investment priority for a majority of US firms. “A year ago, 60% of companies said China was the top or a top three investment priority and this year that’s fallen to 45%,” Michael Hart, president of the organization, told Bloomberg. “China is falling in the rankings as a place for people to invest globally.”
Get Out: And it’s not just America looking for the exit. Earlier this year, both the British Columbia Investment Management Corporation and the Ontario Teachers’ Pension Plan — funds worth hundreds of billion — hit pause on direct investments into China. Italy is considering leaving China’s Belt and Road Initiative. In the first quarter, Taiwanese companies’ investments into China dropped more than 10% year-over-year. But they’ll always have Elon.