Page 34 - 2018 White Paper on the Business Environment in China
P. 34
8 White Paper on the Business Environment in China
On the positive side, China’s 2015 foreign investment but the targets for China share of end products and
catalogue reduced the number of prohibited sectors inputs in the industries covered indicate such openness
from 38 to 36, reduced the number of restricted sectors may be only to production inside of China and many
from 79 to 38, the number of industries for which foreign companies believe the initiative is designed to
Chinese-controlled joint ventures were required from use state support to advantage of Chinese companies
44 to 35, and the number of industries requiring joint and to push foreign companies out of targeted
ventures with Chinese partners but without Chinese industries (U.S. Chamber of Commerce; European
control from 43 to 15 (NDRC). The Free Trade Zones Chamber of Commerce) . The Internet Plus initiative to
in Shanghai, Tianjin, Fujian, and Guangdong have accelerate China’s development through digitalization,
been experimenting with a “negative list” approach in informatization, the Internet of Things (IoT), and
investments not on the list are subject to a less onerous extending private and public services through the
filing system than previously. Officials such as Premier Internet (State Council of the PRC), also plans to reduce
Li Keqiang (during his address concerning the 2017 China’s dependence on foreign hardware, software,
Government Work report in March 2017) have indicated and innovation, and is linked to policies requiring
that China would open further to foreign investment foreign companies to share source codes and to house
(China Ministry of Foreign Affairs). And China announced information on Chinese individuals and entities in China
new opening in the financial services sector in November (Kennedy). The “Go Global” Initiative aims to acquire key
2017 (Reuters). technologies, expertise, and brands, and bring these
back to China rather than looking to collaborate with
However, China remains the most closed of the foreign companies inside and outside of China.
world’s large economies. In 2016, China was the fourth
most restrictive for inward foreign investment of the 63 One of the major questions concerning these
countries assessed by the Organisation for Economic Co- initiatives is whether they will be open to cooperation
operation and Development (OECD), behind only the with foreign partners or reserved to Chinese entities.
Philippines, Saudi Arabia, and Myanmar (OECD). Despite This is important as the OBOR Initiative’s initially
reductions over the years, China still lists 36 sectors identified projects, for example, could exceed US$1
in which foreign investment is prohibited (including trillion in investment and the whole plan could involve
education, media, etc.) and 38 in which foreign US$8 trillion in overall investment (China Energy Fund
participation is restricted (including several financial Committee). Made in China 2025 is being funded at
services, automotive, shipbuilding, e-commerce, and a level on the order of US$70 billion over a five year
medical institutions) (NDRC and MOFCOM). Foreign period;1 Internet Plus and related activities are being
businesses report that protectionist policies, unclear funded initially with a US$14.6 billion fund with more to
regulations, policies that favor domestic companies, follow (The Asset); and President Xi has announced that
stalled reforms, and what some termed selective China’s expected outbound FDI will be in the order of
enforcement of laws have made many U.S. and other US$750 billion from 2017 to 2021 (Kuo). While mapping
foreign companies feel unwelcome in China (American a successful path for China’s initiatives would appear to
Chamber of Commerce in Shanghai). Some have be much easier with substantial foreign cooperation and
reduced investments or reinvestments in China as a participation, it is yet to be seen exactly the approach
result (American Chamber of Commerce in South China). that will be taken.
China’s major initiatives may either help or hurt the The Need to “Make the Case” for Foreign
situation. China’s One Belt One Road Initiative (OBOR) Investment in China
seeks to link 70 countries with ties of infrastructure,
investment, trade, and commerce. Many of the OBOR China appears to be at a crossroads when it comes
countries are places in which major multinational to foreign investment. China is becoming increasingly
companies have much more experience than Chinese assertive in terms of industrial policy and support for
companies. Some foreign companies are already local companies. The push back from government and
benefitting while others report being closed out in favor the public that American and other foreign companies
of Chinese companies. China claims that its Made in receive in China appears to be increasing. There is a
China 2025 Initiative will be open to foreign participation growing economic nationalism and sense among many
on an equal basis with Chinese companies (China Daily),
1 ESA analysis of various press reports.
34
On the positive side, China’s 2015 foreign investment but the targets for China share of end products and
catalogue reduced the number of prohibited sectors inputs in the industries covered indicate such openness
from 38 to 36, reduced the number of restricted sectors may be only to production inside of China and many
from 79 to 38, the number of industries for which foreign companies believe the initiative is designed to
Chinese-controlled joint ventures were required from use state support to advantage of Chinese companies
44 to 35, and the number of industries requiring joint and to push foreign companies out of targeted
ventures with Chinese partners but without Chinese industries (U.S. Chamber of Commerce; European
control from 43 to 15 (NDRC). The Free Trade Zones Chamber of Commerce) . The Internet Plus initiative to
in Shanghai, Tianjin, Fujian, and Guangdong have accelerate China’s development through digitalization,
been experimenting with a “negative list” approach in informatization, the Internet of Things (IoT), and
investments not on the list are subject to a less onerous extending private and public services through the
filing system than previously. Officials such as Premier Internet (State Council of the PRC), also plans to reduce
Li Keqiang (during his address concerning the 2017 China’s dependence on foreign hardware, software,
Government Work report in March 2017) have indicated and innovation, and is linked to policies requiring
that China would open further to foreign investment foreign companies to share source codes and to house
(China Ministry of Foreign Affairs). And China announced information on Chinese individuals and entities in China
new opening in the financial services sector in November (Kennedy). The “Go Global” Initiative aims to acquire key
2017 (Reuters). technologies, expertise, and brands, and bring these
back to China rather than looking to collaborate with
However, China remains the most closed of the foreign companies inside and outside of China.
world’s large economies. In 2016, China was the fourth
most restrictive for inward foreign investment of the 63 One of the major questions concerning these
countries assessed by the Organisation for Economic Co- initiatives is whether they will be open to cooperation
operation and Development (OECD), behind only the with foreign partners or reserved to Chinese entities.
Philippines, Saudi Arabia, and Myanmar (OECD). Despite This is important as the OBOR Initiative’s initially
reductions over the years, China still lists 36 sectors identified projects, for example, could exceed US$1
in which foreign investment is prohibited (including trillion in investment and the whole plan could involve
education, media, etc.) and 38 in which foreign US$8 trillion in overall investment (China Energy Fund
participation is restricted (including several financial Committee). Made in China 2025 is being funded at
services, automotive, shipbuilding, e-commerce, and a level on the order of US$70 billion over a five year
medical institutions) (NDRC and MOFCOM). Foreign period;1 Internet Plus and related activities are being
businesses report that protectionist policies, unclear funded initially with a US$14.6 billion fund with more to
regulations, policies that favor domestic companies, follow (The Asset); and President Xi has announced that
stalled reforms, and what some termed selective China’s expected outbound FDI will be in the order of
enforcement of laws have made many U.S. and other US$750 billion from 2017 to 2021 (Kuo). While mapping
foreign companies feel unwelcome in China (American a successful path for China’s initiatives would appear to
Chamber of Commerce in Shanghai). Some have be much easier with substantial foreign cooperation and
reduced investments or reinvestments in China as a participation, it is yet to be seen exactly the approach
result (American Chamber of Commerce in South China). that will be taken.
China’s major initiatives may either help or hurt the The Need to “Make the Case” for Foreign
situation. China’s One Belt One Road Initiative (OBOR) Investment in China
seeks to link 70 countries with ties of infrastructure,
investment, trade, and commerce. Many of the OBOR China appears to be at a crossroads when it comes
countries are places in which major multinational to foreign investment. China is becoming increasingly
companies have much more experience than Chinese assertive in terms of industrial policy and support for
companies. Some foreign companies are already local companies. The push back from government and
benefitting while others report being closed out in favor the public that American and other foreign companies
of Chinese companies. China claims that its Made in receive in China appears to be increasing. There is a
China 2025 Initiative will be open to foreign participation growing economic nationalism and sense among many
on an equal basis with Chinese companies (China Daily),
1 ESA analysis of various press reports.
34
