Page 18 - 2017 White Paper
P. 18
7 White Paper on the Business Environment in China
Of course the journey ahead is marked with daunting our efforts to upgrade China from a manufacturer of
challenges. Events in the summer of 2015 bore witness quantity to one of quality (Koh and Yao 2015).
to the difficulties faced by China’s leadership in
reorienting the country’s massive economy. The central The Premier promised that the administration’s anti-
bank, seeking to invigorate borrowing and spending, cut corruption campaign would continue unabated. Li said:
benchmark interest rates for a fifth time in 10 months “Our tough stance on corruption is here to stay. Our
and reduced the amount of money banks need to hold tolerance for corruption is zero, and anyone guilty of
in reserve. It also issued a surprise devaluation of the corruption will be dealt with seriously” (Koh and Yao
currency. When the government set out to arrest a 2015).
stock-market slide in June, it first called for limiting the
borrowing of money to buy shares, then confusingly Li also promised a greater role for private business in
reversed itself to encourage more borrowing. The results the economy, which he said would be further opened
were dramatic uneven swings in the stock market and up by halving the number of industries in which foreign
currency, rattling nerves and causing concern among investment is restricted. A draft foreign investment
global investors (Areddy and Wei 2015). catalog issued in November 2014 had reduced the
number of sectors where China limits foreign investment
Yet Xinhua reports that at the G20 summit in Antalya, to 35 from 79 (Koh and Yao 2015).
Turkey, President Xi Jinping said that despite the
recent slowdown, China still contributed 30 % of world While skeptics may argue that progress on such
economic growth. The President remains bullish about crucial matters as SOE reform, anti-corruption and the
China’s economic prospects, saying that it was predicted pilot free trade zones have been modest this year, this
that the economy would grow around 7% that year, paper will set out to tackle recent important policy
and would continue contributing as high as about one developments in these areas and analyze possible
third of global growth. The report added that “China’s implications for foreign businesses. In addition, this
confidence comes from its determination and actions to paper will also delve into recent developments on
comprehensively deepen reform, strengthen economic significant China milestones this year, such as the 13th
endogenous dynamism and policy guidance to build a Five-Year Plan which was approved by top Communist
‘moderately prosperous society’ and double its 2010 GDP Party leadership at the conclusion of the Fifth Plenum—
and per capita income of both urban and rural residents and how the Plan relates to President Xi’s “supply-side
by 2020” (Zhu 2015). reform”, the establishment of the Asian Infrastructure
Investment Bank (AIIB), the administration’s “One Belt,
Endemic in the transition journey of China’s “New One Road” (OBOR) initiative and the historic inclusion
Normal” is the urgent need to pursue the reform agenda of the Chinese currency, the Yuan, into the International
initiated by President Xi Jinping’s administration nearly Monetary Fund’s (IMF) Special Drawing Rights (SDR)
three years ago - a fact which was reiterated by China’s basket of reserve currencies. Lastly, in US-China relations,
senior leadership earlier that year. this paper will examine the results and aftermath of
President Xi Jinping’s State Visit to the U.S. this year, as
In speaking at the opening of the National People’s well as any updates to the US-China Business Investment
Congress in March 2015, Premier Li Keqiang stressed the Treaty (BIT).
need to put the economy on a more sustainable footing
after three decades of breakneck growth and priorities The direction of the Chinese economy is very much
included pushing ahead with reforms of the giant in transition mode, quite similar to how nations such
state-owned enterprises that continue to dominate as Japan (in the 1980s) and South Korea (in the 1990s)
the economy and liberalizing the banking system and transitioned from low-end reprocessing export oriented
financial markets. A key pillar of the reform agenda economies to high-end-technology-oriented/consumer-
is tackling overcapacity in polluting heavy industries based economies. Clearly, China has taken steps to push
and moving its manufacturing factories up the global itself away from a government investment economic
value chain. Premier Li said: “We will implement the growth model and is pushing towards a consumer-
‘Made in China 2025’ strategy, seek innovation-driven based economy. It is clearly feeling the pain of transition
development, apply smart technology, strengthen as those other countries did. It seems, however, to be
foundations, pursue green development and redouble staying the course of the “New Normal”.
18
Of course the journey ahead is marked with daunting our efforts to upgrade China from a manufacturer of
challenges. Events in the summer of 2015 bore witness quantity to one of quality (Koh and Yao 2015).
to the difficulties faced by China’s leadership in
reorienting the country’s massive economy. The central The Premier promised that the administration’s anti-
bank, seeking to invigorate borrowing and spending, cut corruption campaign would continue unabated. Li said:
benchmark interest rates for a fifth time in 10 months “Our tough stance on corruption is here to stay. Our
and reduced the amount of money banks need to hold tolerance for corruption is zero, and anyone guilty of
in reserve. It also issued a surprise devaluation of the corruption will be dealt with seriously” (Koh and Yao
currency. When the government set out to arrest a 2015).
stock-market slide in June, it first called for limiting the
borrowing of money to buy shares, then confusingly Li also promised a greater role for private business in
reversed itself to encourage more borrowing. The results the economy, which he said would be further opened
were dramatic uneven swings in the stock market and up by halving the number of industries in which foreign
currency, rattling nerves and causing concern among investment is restricted. A draft foreign investment
global investors (Areddy and Wei 2015). catalog issued in November 2014 had reduced the
number of sectors where China limits foreign investment
Yet Xinhua reports that at the G20 summit in Antalya, to 35 from 79 (Koh and Yao 2015).
Turkey, President Xi Jinping said that despite the
recent slowdown, China still contributed 30 % of world While skeptics may argue that progress on such
economic growth. The President remains bullish about crucial matters as SOE reform, anti-corruption and the
China’s economic prospects, saying that it was predicted pilot free trade zones have been modest this year, this
that the economy would grow around 7% that year, paper will set out to tackle recent important policy
and would continue contributing as high as about one developments in these areas and analyze possible
third of global growth. The report added that “China’s implications for foreign businesses. In addition, this
confidence comes from its determination and actions to paper will also delve into recent developments on
comprehensively deepen reform, strengthen economic significant China milestones this year, such as the 13th
endogenous dynamism and policy guidance to build a Five-Year Plan which was approved by top Communist
‘moderately prosperous society’ and double its 2010 GDP Party leadership at the conclusion of the Fifth Plenum—
and per capita income of both urban and rural residents and how the Plan relates to President Xi’s “supply-side
by 2020” (Zhu 2015). reform”, the establishment of the Asian Infrastructure
Investment Bank (AIIB), the administration’s “One Belt,
Endemic in the transition journey of China’s “New One Road” (OBOR) initiative and the historic inclusion
Normal” is the urgent need to pursue the reform agenda of the Chinese currency, the Yuan, into the International
initiated by President Xi Jinping’s administration nearly Monetary Fund’s (IMF) Special Drawing Rights (SDR)
three years ago - a fact which was reiterated by China’s basket of reserve currencies. Lastly, in US-China relations,
senior leadership earlier that year. this paper will examine the results and aftermath of
President Xi Jinping’s State Visit to the U.S. this year, as
In speaking at the opening of the National People’s well as any updates to the US-China Business Investment
Congress in March 2015, Premier Li Keqiang stressed the Treaty (BIT).
need to put the economy on a more sustainable footing
after three decades of breakneck growth and priorities The direction of the Chinese economy is very much
included pushing ahead with reforms of the giant in transition mode, quite similar to how nations such
state-owned enterprises that continue to dominate as Japan (in the 1980s) and South Korea (in the 1990s)
the economy and liberalizing the banking system and transitioned from low-end reprocessing export oriented
financial markets. A key pillar of the reform agenda economies to high-end-technology-oriented/consumer-
is tackling overcapacity in polluting heavy industries based economies. Clearly, China has taken steps to push
and moving its manufacturing factories up the global itself away from a government investment economic
value chain. Premier Li said: “We will implement the growth model and is pushing towards a consumer-
‘Made in China 2025’ strategy, seek innovation-driven based economy. It is clearly feeling the pain of transition
development, apply smart technology, strengthen as those other countries did. It seems, however, to be
foundations, pursue green development and redouble staying the course of the “New Normal”.
18
