foreign companies were desperate to get into China, and faced formidable bureaucratic obstacles in their way. Now many are getting out. Over the past year several foreign law firms have closed some or all of their Chinese offices. Orrick, Herrington & Sutcliffe, an American one, said on March 22nd it would shut the Shanghai office it opened 20 years ago. Another, Akin Gump Strauss Hauer & Feld, plans to exit China altogether this year.
The trouble is that Mr Xi’s desire to lure back foreign business runs up against his other objectives. Observers describe his leadership model as “wanting this, that and the other”. Foreign companies are to do business in China but keep their hands off Chinese data. Multinationals are to double down on China and homegrown brands are meant to give them a run for their money. China’s technology industry is to decouple from the West while attracting Western investment.
Consider data flows. Regulators may have loosened some restrictions but weeks earlier they tightened others, by updating a state-secrets law for the first time since 2010. The law now covers “work secrets”, or information that is “not state secrets but will cause certain adverse effects if leaked”. The vague wording gives security agencies broad powers to consider any communication between foreigners and Chinese employees as a potential violation.
A further reason foreigners are having second thoughts about China is stiffening local competition, a lot of it given a leg-up by the state, one way or another. Government support for makers ofs, batteries, solar panels and wind turbines has created oversupply and pushed down prices. This has been a blessing for foreign importers of Chinese-made components. For multinationals trying to compete in China it has been a curse.