China has recently made headlines by becoming the world’s largest exporter of merchandise goods. Unilateral liberalisation over the last 25 years has made China a profitable option for foreign businesses to outsource production. Supply and production chains that span the globe utilise Chinese division of labour. But this investment is dependent upon China remaining a profitable option and there are signs that rising Chinese protectionism may be threatening this.

In today’s Telegraph senior business leaders document the increasing number of non-tariff barriers to trading that confront foreign firms trying to do business in the Far East. According to the interviewees, foreign businesses are facing increasingly tougher regulations and restrictions. “Buy Chinese” provisions and government subsidies to domestic businesses are making it harder than ever before for firms to compete:

 “We have been here since 1995,” said the head of one technology company that did not wish to reveal its identity for fear of reprisals. “We have 1,200 Chinese staff and only four foreign managers. But now we see subsidies going to our rivals, which are mostly state-owned firms,” he added.

“And then there are regulations that force our clients to buy from only Chinese companies. The government is forcing all the companies in our field to be specially-certified. But no foreign firms are allowed to have the certificate...”

This story is not unique to China: The U.S. and the E.U. members are all guilty of implementing protectionist measures over the last year. But this time the shoe is on the other foot- U.K based firms are feeling the very real effects of anti-trade policies abroad. The result is reduced market access and deterred investment. As firms start looking elsewhere, protected Chinese firms will lose their competitive edge and China will lose the benefits of large-scale foreign investment.

The dangers of hiding domestic businesses behind protectionist walls should serve as a lesson to us all. China’s trade policies are far from perfect but they have been able to attract investment from foreign firms because the relatively business friendly environment makes it cheaper than anywhere else. In today’s globalised world capital and labour can, and does, move faster than ever before. “Protecting” against foreign investment, whether in Washington or Beijing, is a sure fire way to ensure that it moves somewhere else.