Archive for ‘foreign investment’

15/03/2019

China foreign investment: How doing business will change

Delegates stand during the national anthem at the end of a plenary session of the National People's Congress in March 2019Image copyrightGETTY IMAGES
Image captionOnly a handful of delegates at China’s People’s Congress ever vote against legislation

China is rushing through a foreign investment law in an apparent attempt to placate Washington as negotiators try to dig the world’s two largest economic powers out of an ongoing trade war. But will it work?

The 3,000 or so delegates to China’s annual National People’s Congress (NPC) endorsed the new law on Friday. They don’t oppose legislation. That’s not how it is done here.

When a vote is taken there are normally only a handful who vote against. Some of them potentially for show, because 100% “yes” votes one after another would look ridiculous.

If there is pushback against a draft bill and amendments made, this happens well before the NPC sits, at a series of standing committee meetings behind closed doors. The process can take years.

This time it took three months.

The Chinese government appears to have rushed through the investment law as an olive branch to the US amid trade war negotiations.

However, many in the business community here in China see this law as a kind of sweeping set of intentions rather than a specific, enforceable set of rules. They fear it could be open to different and changing forms of interpretation.

Employees working in a car factory in ChinaImage copyrightGETTY IMAGES
Image captionForeign companies may no longer have to partner with local firms to enter the Chinese market

The big-ticket items it is said to address, in terms of the concerns of foreign companies, include intellectual property theft, the requirement for international firms to partner up with a local entity, and unfair subsidies to Chinese companies.

It will also address the preferential treatment in awarding contracts to Chinese companies, and forcing foreign firms to hand over their technological secrets as the price of entry to the massive Chinese market.

But this law isn’t going to help everyone.

There is a “black list” of 48 sectors that will not be open to foreign investment or, in some cases, not open without conditions or special permission.

For example, there is a complete ban on investing in fishing, gene research, religious education, news media, and television broadcasting.

Partial investment is allowed in oil and gas exploitation, nuclear power, airlines, airport operation, and public health, amongst others sectors.

Non-renewable energy automobile production will require partnerships for a few years but then be phased out.

For industries not on the list, the principle is that foreign companies will receive the same treatment as their Chinese counterparts.

Man stands in front of stock market boards in ChinaImage copyrightGETTY IMAGES
Image captionWhile China is opening up more to foreign investment, many sectors remain out of bounds

But should foreign companies also be wary?

One of the provisions will include a requirement for the local subsidiaries of international firms to report various details of their operation to Chinese officials.

This could include performance indicators relating to labour relations, overall staffing numbers, pollution records and the like.

That sounds fine except that foreign companies have asked for – and not received – legal guarantees that this data will not be passed on to their Chinese competitors.

Then there is the promised complaints procedure should you seek redress following any perceived violations of the new law.

If this system is run through the normal Chinese courts, which routinely guarantee results favourable to the Communist Party, then to many this would not seem like a satisfactory enforcement mechanism.

One part of the law specifies that there is to be a ban on “illegal government interference” in the activities of foreign business.

The further you go up the government ladder the more implausible it would be to win in such a dispute.

Over the years we have reported on many cases of foreign businesspeople, especially ethnic Chinese, who have been sent to prison on highly questionable charges following a commercial dispute with a local business person who enjoys the backing of low-level Communist Party cadres.

Those here with long memories know this and are approaching the new law with an understandable level of caution.

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16/02/2019

U.S. backs India’s right to self-defence over Kashmir attack – Indian government

NEW DELHI (Reuters) – The United States supports India’s right to self-defence against cross-border attacks, India’s foreign ministry said on Saturday after a deadly car bombing in disputed Kashmir raised tensions with rival neighbour Pakistan.

Prime Minister Narendra Modi has promised a strong response after a Pakistan-based militant group claimed responsibility for the suicide attack on a military convoy on Thursday that killed 44 paramilitary policemen.

India’s government said it had evidence the group, Jaish-e-Mohammad (JeM), had the backing of Pakistan and demanded Islamabad take action. Pakistan has condemned the attack and rejected India’s allegations.U.S. National Security Adviser John Bolton spoke to his Indian counterpart Ajit Doval on Friday night, promising to help bring those behind the attack to justice, the foreign ministry said in a readout of the phone call.

“The two NSAs vowed to work together to ensure that Pakistan cease to be a safe haven for JeM and terrorist groups that target India, the U.S. and others in the region,” the foreign ministry said.

“They resolved to hold Pakistan to account for its obligations under U.N. resolutions,” it added.

India has for years accused Muslim Pakistan of backing separatist militants in divided Kashmir, which the neighbours both claim in full but rule in part.

Pakistan denies that, saying it only offers political support to the Himalayan region’s suppressed Muslim people.

Modi, who is facing an election in the next few months, has called a meeting of political parties on Saturday to build support for action against Pakistan.

Indians have poured onto social media to vent their fury over the suicide bombing in Kashmir, with many of them calling for swift retribution against Pakistan as TV news shows hosted jingoistic debates.

When he swept to power at the head of a Hindu nationalist-led alliance in 2014, Modi vowed to pursue a tough line with Pakistan. The two countries have gone to war three times since independence from Britain in 1947, twice over Kashmir.

The attack comes at a difficult time for Pakistan, which is struggling to attract foreign investment and avert a payments crisis, with its swiftly diminishing foreign currency reserves at less than $8 billion, equivalent to two months of import payments.

Source: Reuters

13/01/2019

Chinese commerce minister vows continued efforts to attract foreign investment

BEIJING, Jan. 12 (Xinhua) — China will continue its efforts to widen market access for foreign investment and build a better business environment, Minister of Commerce Zhong Shan has said.

In an interview on Friday, Zhong said measures will be taken to shorten negative lists for foreign investors adopted in pilot free trade zones (FTZs) and nationwide, and wholly-foreign ownership will be allowed in more sectors.

China will press ahead with opening-up in the service sector, and encourage foreign investment in manufacturing and high-tech industries, and in central and western regions, Zhong said, adding that governments will help foreign companies address difficulties in investing in China.

To provide a favorable environment, the ministry will push for the foreign investment law and improve governments’ handling of complaints from foreign businesses, Zhong said.

As a major investment destination in the world, China maintained stable growth in foreign direct investment (FDI) against a gloomy global climate. Its FDI went up 3 percent year on year to 135 billion U.S. dollars last year, while that of the world’s total and developed countries slumped 41 percent and 69 percent, respectively, in the first half of 2018.

The World Bank has raised China by 32 places in terms of business environment, and 95 percent of companies surveyed by the U.S.-China Business Council said they would increase investment or maintain the existing presence in China in the coming year.

“The Chinese market has huge potential and sound prospects,” Zhong said. China’s goods consumption is expected to gain 9.1 percent from a year ago in 2018 to 38 trillion yuan (5.6 trillion U.S. dollars), serving as the biggest growth driver for five consecutive years.

“China is steadily marching toward the largest country of goods consumption,” Zhong said.

The ministry will further stimulate domestic consumption this year, with measures to promote urban consumption upgrades, tap into the potential in rural areas, foster modern supply chains, and bolster services consumption.

China’s foreign trade also remained steady, with the total imports and exports up 14.8 percent to stand at 4.2 trillion U.S. dollars in the first 11 months, hitting a new high. The services trade increased 15 percent from a year ago to 656.2 billion U.S. dollars in the first ten months, the world’s second largest.

Zhong listed three major tasks of the ministry in 2019: holding the second import expo, properly handling trade frictions with the United States, and pushing forward pilot FTZs and the Hainan free trade port.

The ministry will implement the consensus reached between Chinese and U.S. heads of states, propel economic and trade negotiations, and expand cooperation with U.S. states and cities, businesses and non-governmental institutions in a bid to promote stable China-U.S. economic ties and win-win cooperation.

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