Why global CEOs are still bullish on China

Multinational corporations from the U.S., Europe, Japan and Korea continue to pump billions of investment dollars into China despite its slowing economy and the protracted U.S.-China trade war.

So says Bloomberg in a report this week noting that foreign direct investment into China rose nearly 3% in the first nine months of 2019 from a year earlier, according to China’s Ministry of Commerce. That’s about the same pace as China’s inbound FDI growth for 2018.

Chinese FDI figures are fiendishly difficult to parse because it’s almost impossible to tease out how much investment comes from outside China and how much is “round-tripping”—Chinese companies moving money offshore and then redirecting it to the mainland to take advantage of tax breaks and other incentives. As Bloomberg duly notes, about three quarters of China’s FDI in 2018 was routed through Hong Kong, the British Virgin Islands or the Cayman Islands, destinations a recent International Monetary Fund report dubbed channels of “phantom FDI.”

Even so, Bloomberg concludes China’s continued FDI growth is real, citing big investment commitments by firms including Tesla, Walmart, General Electric, LG Chem, and BASF.

Those investments defy President Trump’s August decree that American companies must “immediately start looking for an alternative to China.” Bloomberg‘s take: never mind the bickering between Washington and Beijing; for big multinationals, “the rising spending power of 1.4 billion people” is simply “too hard to resist.”

Beijing has sought to counter trade frictions with the U.S. by stepping up its appeals to global companies. At the second annual China International Import Expo in Shanghai last week, Chinese president Xi Jinping styled himself as a champion of globalization and free trade while indirectly rebuking Trump’s unilateralism. “Economic globalization is a historical trend,” Xi said. “Although there are sometimes some waves going backward, and even though there are many shoals, the rivers are rushing forward and no one can stop them.”

At a “Multinational Summit” in the eastern Chinese city of Qingdao last month, Xi vowed to fling open China’s market to companies from around the world. “The door of China’s opening up will only open wider and wider, the business environment will only get better and better, and the opportunities for global multinational companies will only be more and more,” he said in a letter read out by vice premier Han Zheng.

But if the world’s business leaders remain eager to capitalize on those opportunities, many of its political leaders seem ever more leery of being perceived as too cozy with Beijing. The latest example of that divergence: Bloomberg‘s billionaire founder Michael Bloomberg, whose company is heavily invested in the world’s second-largest economy and has worked relentlessly to recruit global CEOs to join a high-profile “New Economy Forum” to promote cooperation with China.

The Bloomberg conference will be held next week in Beijing. But last week Bloomberg morphed from executive to politician, signaling his intent to challenge Trump in the next presidential election as the Democratic party’s nominee. On Friday, Reuters reported that Bloomberg will not attend the Bloomberg event.

More China news below.

Clay Chandler
@claychandler
clay.chandler@fortune.com