From: lessgovt@gmail.com   
      
   It’s Getting Riskier to Do Business in China   
   By Simone Gao, June 21, 2023, WSJ   
   Foreign executives who visit China lately are getting the royal treatment. A   
   photo of Tim Cook shaking hands with customers at a Beijing Apple store went   
   viral on Weibo in March. Chinese social-media users showered Tesla CEO Elon   
   Musk with compliments    
   during his trip to the country last month. In his first post-pandemic visit to   
   China, JPMorgan CEO Jamie Dimon took center stage at the bank’s Global China   
   summit in Shanghai. And last week Bill Gates met Xi Jinping in person.   
      
   Mr. Musk reportedly described the U.S. and Chinese economies as “conjoined   
   twins” that can’t be separated. Mr. Dimon proclaimed the enduring   
   connection between the West and China. The Chinese government seeks to use   
   such visits to entice skeptical    
   foreign investors back into the country after Covid. And it’s fair to say   
   that people such as Messrs. Musk and Dimon, having tasted success in China,   
   genuinely believe what they say. It is crucial to understand, however, that   
   their triumphs in China    
   are the product of unique circumstances.   
      
   Tesla’s influence on China can’t be overstated. The company’s   
   open-source technology has become the backbone of the country’s   
   electric-vehicle industrial chain. Tesla’s Shanghai Gigafactory manufactures   
   95% of its parts locally. But other    
   foreign manufacturers, most of which are reluctant to give away their secrets,   
   can’t replicate Mr. Musk’s success. By sharing its technology with China,   
   Tesla jump-started an entire domestic industry. Now, as that industry is   
   beginning to show signs    
   of maturity, Tesla faces increasingly tough domestic competition from Chinese   
   companies. Soon Beijing won’t need Tesla, and Mr. Musk will face regulatory   
   hurdles and other difficulties.   
      
   Tesla and JPMorgan have succeeded in China, but that doesn’t mean others can   
   too. China faces serious demographic challenges that make it hard to sustain   
   an expanding economy, which most companies need to thrive. China’s   
   population is shrinking and    
   getting older. The official count is in dispute, but demographer Yi Fuxian   
   predicts China’s population will decline to one billion by 2050. The latest   
   edition of the U.N. World Population Prospects report estimates it could fall   
   to 767 million by 2100.   
      
   A shrinking population means the ailing Chinese property market won’t   
   recover no matter what the government does. That will restrict growth and hurt   
   global investors’ confidence in the Chinese economy. China will lack the   
   labor force to maintain its    
   status as the world’s factory. Consumption will also decline as the   
   population shrinks, while local-government debt piles up to the point of   
   default. As China’s economy contracts, the Communist Party will protect the   
   profits of state-owned    
   enterprises, further limiting opportunities for foreign companies.   
      
   Despite these obstacles, foreign companies remain hesitant to scale back their   
   operations in China, where there’s plenty of money still to be made. Mr. Xi   
   is well aware of this reality and making the most of it. In recent months,   
   Chinese authorities    
   have raided at least three foreign consulting and research firms as part of a   
   national-security-related investigation. In March, investor Mark Mobius told   
   Fox Business that he couldn’t withdraw money from his HSBC account in   
   Shanghai because of the    
   country’s capital controls, and he warned investors to be “very, very   
   careful” about investing in China.   
      
   China doesn’t allow yuan to be exchanged freely for U.S. dollars. As Mr.   
   Mobius has learned, it’s also difficult for depositors to transfer money   
   from dollar-denominated accounts out of the country. If Mr. Xi decides one day   
   to take Taiwan by force    
   or cut ties entirely with the West, foreign capital could be trapped inside   
   China. Corporate assets—and people—could be held hostage by the Chinese   
   Communist Party. Western shareholders should waste no time asking their CEOs   
   to prepare contingency    
   plans.   
      
   Ms. Gao is a journalist and advisory council member of the Krach Institute for   
   Tech Diplomacy at Purdue.   
      
   https://www.wsj.com/articles/its-getting-riskier-to-do-business-   
   n-china-taiwan-capital-control-yuan-tesla-d3dc88f6   
      
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