Xi Jinping wants foreign investors and corporates to believe China’s still a good place to invest — that the country’s still “opening up,” and that contrary to the Party’s track record under his “leadership” (read: iron-fisted rule), Beijing welcomes foreign capital.

Some folks (more folks, it would seem) are skeptical. The latest data from SAFE showed another negative print on the inbound foreign direct investment series, the second in four quarters. Both of the two declines occurred over the past year, and the drop for Q2 — nearly $15 billion — counted as a record in data back to 1998.

As the figure below shows, this series rose steadily, albeit unevenly, over two decades, reaching a record high near $110 billion in Q1 of 2022. Then it collapsed.

It’s not a coincidence that the precipitous decline accompanied the onset of the Shanghai lockdowns, nor that the series’ failure to recover comes as China struggles to prove the country’s households haven’t succumbed to a deflationary psychology amid a long-running economic malaise defined by moribund domestic demand.

Foreign investors’ concerns are twofold. First, they’re worried about the economy and specifically about the just-mentioned threat of deflation. Second, they’re worried about simmering geopolitical tensions and the distinct possibility that the US government will seek to impose more restrictions on investments and capital flows to critical Chinese industries in a bid to thwart Xi’s tech ambitions.

To be sure, Xi isn’t doing himself any favors. The Party’s decision calculus and policymaking more generally were always a black box in China, particularly at the highest levels. But now, nearly two years on from Xi’s de facto coronation at the 20th Party Congress, the process is entirely opaque. Outside observers, including economists and diplomats, are flying almost entirely blind. When foreign business leaders do get an opportunity to engage with the government, it’s in farcical, stage-managed settings designed specifically to serve the state’s propaganda machine.

Outwardly, Xi continues to preach platitudes about “opening up” and peaceful coexistence, but the inescapable reality of the regime is dark totalitarianism and an implicit threat of military force. Xi’s goal is Chinese hegemony, not just regionally but globally.

That’s not to say American foreign policy doesn’t deserve some of the blame for what’s now an irreparably fraught bilateral relationship with the Chinese. It’s just to see — and call — the world as it is. Foreign investors and corporates are begrudgingly coming around to the reality both of China’s economic morass and Xi’s unrestrained authoritarianism, which is in every meaningful respect indistinguishable from one-man rule.

Technically speaking, the SAFE data charted above could — and to a certain extent does — evince dynamics unrelated to concerns about geopolitics and the Chinese economy. For example, the series registers the movement of corporate profits. With yields and rates falling in China and cash rates still very elevated abroad, corporates have a strong incentive to stash their cash elsewhere. But even that’s tangentially related to concerns about the domestic economy: There’s a reason rates are falling in China after all.

Bottom line: Xi’s efforts to court foreign investment aren’t working. Which perhaps suggests that at long last, decision makers from around the world have stopped buying his bullsh-t.