Loss of foreign capital no longer such a big deal for China

A commentary carried by People's Daily in a conspicuous position on the front page yesterday did offer something new.

First of all, the commentary - headlined "The Chinese market is no longer what it used to be as foreign capital not keeping up with changes withdraw" - revealed an important number: the actual use of foreign capital in the mainland fell by 27.1 percent year-on-year in 2024.

At the same time, the number of newly established foreign-funded enterprises in the mainland increased by 9.9 percent year-on-year.

Although there was an apparent contrast, the underlining message could not be clearer.

As suggested by an old Chinese saying, others travel through the night to take the exams as some people resign from their official positions to return to their hometowns.

The loss of some foreign capital is never something to miss because there is new capital flowing in. This is probably the narrative People's Daily was trying to impress.

Nonetheless, the readiness with which it revealed the information - a fall in the actual use of foreign capital and an increase in newly formed foreign-funded corporations - was still eye-catching somehow.

It appears that the state media has learned to handle negative information that would have been considered too sensitive to discuss publicly with greater sophistication than they would have in the past - no longer a standard denial but, rather, attempts to put it into perspective.

This is more convincing than simply dismissing the bad news altogether.

By all measures, a fall of 27.1 percent can only be bad.

However, mainland officials seem to have become more confident than ever in accepting and dealing with an unpleasant situation.

A major point in the People's Daily narrative was that withdrawal of foreign capital was not something to regret because the Chinese market has changed so much and foreign investors withdrawing from it have been those not keeping up with these changes.

What does it mean?

Only foreign-funded enterprises capable of responding quickly to keep up with the changes in the Chinese market can be successful and the Chinese market is still full of opportunities. It will continue to be a sweet spot for foreign investors who had better prepare themselves for competition in order to secure a firm foothold with their exclusive skills.

It is a narrative that dwells on confidence, which is not unfounded.

The rise of home-grown AI platform DeepSeek offers the most recent example of such confidence. DeepSeek may not be the most advanced tool in its field, but it offers an economic solution to meet the need of a great number of potential users, outperforming its expensive peers in cost-effectiveness.

A less obvious, though subtle, example in the new confidence may be found in the Spring Festival period blockbuster Nezha 2, the animation production made possible by the private sector rather than the state organization.

It would not surprise me to see more breakthroughs in the mainland in 2025 despite the pressure mounting in the external environment.