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Chinese moves to boost foreign business also help Chinese companies



Employees walk in Luziajui's business district in Shanghai, China.

Lucas Schifres | Getty Images

PAGING – The Chinese government's recent efforts to facilitate the work of foreign companies locally are coming as China's own companies aspire to be global players.

This month, China continued with long-awaited reports on the removal of foreign-ownership limits in major parts of the financial industry. Some foreign business organizations also said this month that they were encouraged by the draft rules implementing the new investment law in China, which enters into force on January 1

.

While moves come amid US pressure on trade, some analysts point out how such changes are helping China achieve its own development goals, which may not match the vision many foreign organizations see as more market-oriented system.

"To me, what is important to the opening is where it comes from: China is looking to globalize its market, not necessarily liberalize it," said Shantal Grinderslev, a partner at Shanghai-based investment management consulting firm Z She added that the difference would affect how companies – in her case, financial firms – choose to expand in China.

There are restrictions on how much of the Chinese market foreign companies can take advantage of, now that the Asian country has grown into the second largest World Trade Economy In terms of trade, technology and capital, the world has increased its exposure to China between 2000 and 2017, while the Asian giant has reduced its exposure to the rest of the world since 2007, a report said this summer McKinsey Global Institute.

Lester Ross, chairman of the policy committee of the American Chamber of Commerce in China, said he expects foreign companies to probably gain from 10% to 20% of the Chinese market, but the question is whether business can cover much more than that.

Foreign banks still have less than 2% of the market, although they have been able to operate in China for more than a decade, analysts said.

Meanwhile, the entry of foreign financial institutions can help Chinese individuals and companies improve access to global markets, said Ross, who is also a partner at WilmerHale Law Firm. For example, he noted, "There are weaknesses in the Chinese regulatory system that undermine the ambitions of Chinese financial institutions in the United States."

The Chinese also want better protection of IP

Another area in which China responds to foreign business complaints is protection of intellectual property.

"One reason this is changing is because you have Chinese companies starting to acquire valuable international brands," says Andrew McGinty, a partner at Hogan Lovells Law Firm based in Hong Kong

more to show how serious it is about protecting intellectual property, said McGinty. But he noted efforts as a clause in the draft rules for the implementation of the new foreign investment law, which requires the removal of trade secrets when officials exchange documents internally.

The Foreign Investment Act was passed in March and aims to improve the protection of intellectual property, prevent the forced transfer of technology and put overseas companies on an equal footing with local players.

"This is probably the biggest burst of openness since foreign investment was allowed in China (circa the 1980s)," says McGinty.

After the communist part of China took control of the country in 1949, the economy was essentially closed to foreigners until 1978, when former Chinese leader Dun Xiaoping led the restructuring, known locally as "reform and opening up." China's international business has also increased since the country joined the World Trade Organization in 2001, despite criticism that Beijing is slowly following its commitments to reduce government control. Critics added that since Xi Jinping took power in 2012, initial efforts to increase market-oriented policies have been reversed.

This is perhaps the biggest burst of openness since foreign investment was allowed in China (circa 80s). [19659019] Andrew McGinty

Partner in Hong Kong at Hogan Lovells Law Firm

US President Donald Trump has stepped up pressure on China to buy more American products and address long-standing business complaints about uneven market access. Since last summer, the Trump administration has applied billions of dollars in Chinese goods and blacklisted several prominent Chinese technology companies, essentially preventing them from buying from US suppliers. China retaliated with its own tariffs on US goods and threatened to release a "list of unreliable entities".

Just hours before Trump and Liu He, China's leading trade negotiator, held a press conference at high-level trade talks earlier this month, China's Securities Regulatory Commission announced that foreign firms could take full advantage ownership of futures companies since January 1. Foreign companies may also take over control of mutual fund management companies as of April 1 and securities companies as of December 1, 2020.

Among other measures, China also announced new regulations last week to improve the business environment.

"China is much better today than it was 30-40 years ago," said Xiaodong Lee, founder and CEO of Fuxi Institution, an internet development consultancy in China that promotes cross-border connections.

Lee encourages foreigners to come to see China for themselves and to take advantage of an environment that is still evolving, despite their differences from the US

"In China (foreign companies) they can make money, and China too hopes foreign companies can make more money, "Lee said, according to a CNBC translation from

US companies and their affiliates make far more money in China than their Chinese counterparts in the US, a research report said in August the company Gavekal Dragonomics. The firm's analysis showed that in 2016, US business sales in China exceeded $ 450 billion, while Chinese sales in the US were below $ 50 billion.


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