New | Walk the talk: China now needs to act on its pledges to businesses, analysts say
First came the words and now action is needed to back up Chinese President Xi Jinping’s commitment in Seattle last week to bring down barriers for foreign companies doing business in China, observers say.
In a closed-door meeting with 30 business executives at the start of his US tour, Xi said China would cut restrictions to market access but stopped short of giving a much-needed timetable that would go some way to restoring the corporate sector’s confidence, according to a source with knowledge of the talks.
The source said three people from China and three from the United States spoke at the gathering, raising issues from cybersecurity and barriers to market access, to improving regulatory transparency and consistency.
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Xi “addressed the issues that were exactly what CEOs wanted him to say” but the real challenge was to implement reforms and open up markets, the source said.
Sean Miner, research associate with the Peterson Institute for International Economics, said the business community would closely follow developments in the next few months.
“[This includes moves on] currency, the draft banking law that includes the ‘secure and controllable’ provision in regard to bank software, the implementation of the recently passed laws on cybersecurity and also on national security, which has raised a lot of confusion among the business elite,” Miner said.
Beijing’s intervention to stabilise the stock market in the last few months and the sudden devaluation of the yuan set off turbulence in the global markets and raised doubts about the country’s economic climate and Beijing’s commitment to market-oriented reforms. Foreign firms and business groups have also complained about a tighter investment environment and strict controls on information flows in China.
Carson Wen, of counsel with Jones Day, said: “I have heard foreign companies and think tanks saying that the Chinese authorities are changing the rules of engagement with foreign investors as China becomes less dependent on foreign investment for its development.
“As the Chinese economy grows and systems become more sophisticated, that is bound to be the case, as was the same in the path of development of the advanced economies.”
Observers said it was disappointing to see no substantial progress on bilateral investment treaty talks, with the two countries agreeing only to “commit to intensify the negotiations and to work expeditiously to conclude the negotiation” of a “high standard” treaty, according to the White House.
Miner said the two countries were “far apart” on a negative list that would define what sectors were off limits to companies from the other country. There was also “distance to go” on other sections of the treaty, such as those on state-owned enterprises, competition policy and technology transfer, he said.
“With the passing of the summit and no real progress, the probability of the US-China BIT negotiations wrapping up before Obama finishes his presidency has diminished,” Miner said.
Lu Zhengwei, chief economist with Shanghai-based Industrial Bank, said the most reassuring takeaway for investors was that the two countries indicated they would not engage in confrontation and would respect each others’ interests.
