(Yicai Global) March 25 -- In recent weeks a number of articles have circulated in various publications, including The Economist and Nikkei Asia, claiming that China is experiencing “foreign capital outflows”. The reasons why have been attributed to uncertainty in the global economy given events in Ukraine, but also claiming such are motivated by political considerations on the premise that foreign investors are losing confidence in China amidst the conflict, either fearing that Beijing will be subject to new sanctions led by the US and intensified efforts towards “decoupling”, or that the probability of a contingency over Taiwan is somehow increased, a claim which is of course based on hysteria as opposed to reason.

These stories are predictably overhyped and play into a broader discourse of “negativity” stories surrounding China’s economy which are endemic to the mainstream media, always eager to proclaim an end to China’s economic fortunes and herald a pessimistic future. This is of course no different, and whilst this obviously factors in the uncertainty present in global politics right now, it nonetheless also undercuts the reality that China continues to be one of the world’s largest destinations for foreign direct investment and market opportunities.

In the year 2021, foreign direct investment into China topped a record of over CNY 1 trillion (USD 173.48 billion) an increase of either 14.9% or 20% year on year depending on which currency is tracked. According to Dezan Shira & Associate’s “China Briefing” significant amounts of such went into China’s high-tech sector and high-tech services and were not deterred by any disruptions of that year. The briefing further estimated that certain events would in fact increase opportunities for foreign investors into China, including the ratification of the Regional Comprehensive Economic Partnership (RCEP), China’s bid to join CPTPP, and its intention to further reduce negative lists for inbound investment. This is coupled with the continuing opportunities offered by China’s market size which has continued to outshine political expectations.

But will of course, recent events create new and lasting uncertainties? The answer is no. First of all, contrary to mainstream media and politically driven hysteria, China is not about to make any abrasive decisions anytime soon, not least during a year of the party congress. Sustaining economic growth and further integration with the global economy remain the political priorities of China’s leaders, and the strategic considerations of the Ukraine conflict do not shift this paradigm. It seems implausible that Beijing would in these circumstances initiate moves that would invite sanctions against it from western countries, either in supporting Russia or taking a high-risk conflict of its own. China perceives it has time on its side, Moscow does not.

Yet the mainstream media continues unabatedly to drive this narrative, a recent op-ed in the Financial Times, a newspaper which has become insidiously negative concerning China, was titled: “Foreign businesses in China need to heed the lessons of Russian exodus” hypothetically playing up the event of a Taiwan contingency and pointing to how western businesses fled Russia en-masse. Of course, this deliberately ignores the reality that China is a far, far larger, and more critically important market than Russia, by perhaps 10-fold, but the theme is otherwise consistent on gaslighting the consequences of a potential event through a misleading comparison elsewhere.

Given such, it is important to recognize on the matter of Taiwan’s heavy rhetoric has been consistently placed by its leaders on “peaceful reunification”. Whilst China has increased penalties against those it deems to be disrupting cross-strait reconciliation, such as for example through its new “Anti-Separatist law” and blacklisting certain figures, as well as fining businesses, China’s signals appear only to seek to enforce red-lines whilst continuing an existing strategy of seeking to integrate the island with the mainland through various means. China wants to enforce its position, especially in the wake of foreign powers causing disruption and the DPP in Taipei being uncooperative, but China has been quite clear about what method is intended.

Given this, it has been a constant theme of the media to gaslight investment implications for China in wake of whatever global events may be happening. The coverage was remarkably similar following the emergence of the covid-19 pandemic in 2020 which forecasted doom for China-based supply chains, manufacturing and investment. This was quickly proved wrong.  This media phenomenon has been described by some as “wish casting” where they publish in anticipation of an event they hope to see happen, as predisposed to what “will” happen. Given this, once the situation becomes more predictable investment into China will be as steady as it always is, and the key takeaway is that Beijing is extremely unlikely to make any decisions which would serve to be detrimental in the long term given the priorities at hand.