Xi’s Summit Promise of Openness Is Giving Way to Greater

Control

When Chinese leader Xi Jinping met with American business leaders during the May summit in Beijing, he delivered a

familiar message: China would continue opening its economy and welcome foreign investment.

But instead of greater openness, only a

few weeks later, China began imposing tighter financial and trade controls across the board.

For instance, Beijing is restricting outbound capital while increasing scrutiny of cross-border investment. It’s also walling off strategic sectors, such as artificial intelligence (AI), to outside investors and collaborators and further restricting the flow of information available to foreign businesses and investors.

The contradiction is difficult to ignore. If China seeks to attract foreign capital and restore investor confidence, why is it simultaneously building

higher barriers around its economy?

The answer likely lies in a combination of factors. Some of those include economic weakness, geopolitical rivalry, national security concerns, and growing fears inside Beijing that China’s technological advantages could be diluted through capital flight and foreign influence.

Xi’s pledge that China would “open wider” to foreign business now appears increasingly at odds with policy developments unfolding across the country.

Beijing Is Trying to Prevent Capital Flight

China’s economy continues to face significant structural challenges, including weak domestic demand, a prolonged property downturn, local

government debt pressures, and slowing foreign investment.

Against that backdrop, Beijing is becoming increasingly concerned about money leaving the country.

Recent reports indicate Chinese brokerages have sharply restricted new cross-border investment activity through total return swaps, a mechanism used by investors to gain overseas exposure. The move is widely viewed as part of a broader effort to curb capital outflows and strengthen government oversight of financial flows.

China’s new overseas investment regulations also expand government authority over outbound investment, technology transfers, and cross-border capital movements.

The reality is that Beijing cannot simultaneously

embrace unrestricted capital movement and fear capital flight.

AI Is a National Security Asset

Artificial intelligence is another factor driving Beijing’s tighter restrictions. As is now widely understood, AI is no longer viewed merely as a commercial industry; it is strategic national security.