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e of the areas where reforms are ‘backsliding’ law aims to address common complaints from the
is state-owned enterprise (SOE) reform, with the foreign business community, such as by explicitly
role of SOEs in resource allocation advancing while banning forced technology transfers.
the role of the private sector is receding. One of the
reasons for this is that SOEs enjoy more preferential Critics, however, say that many of the provisions
access to credit than the private sector. in this document are still quite general, and the law
itself will not take effect until January 1, 2020.
Although the government’s deleveraging campaign
has reduced financial risks, it has hit the private ‘Feeling the stones’: What to make of
sector harder than the state sector. This is despite China’s reforms record
the private sector being three times more efficient
on average than the state sector and contributing Since 2013, the progress of reforms has been
close to two-thirds of China’s GDP growth. mixed. On one hand, China has made clear progress
in some areas, such as improving the business
In terms of FDI, even with the easing of restrictions environment and opening some new sectors to
with the introduction of the new negative list, there foreign investment.
are claims that there is still an unlevel playing field
with domestic firms being given preference over On the other hand, however, the state has
foreign firms. reasserted itself rather than given the market the
decisive role. Xi, for instance, has called for SOEs to
This is exemplified by the ‘Made in China 2025’ become bigger, stronger, and more efficient, while
industrial strategy, which is at the center of the the Communist Party has increased its presence in
trade war with the US. both state-owned and private firms in recent years.
Made in China 2025 is an industrial policy issued Given China’s mixed record of economic reform
in 2015 that targets 10 high-tech sectors under the since Xi came to power, it is not yet clear whether
guidance of the Chinese state. the statist turn is a fundamental change in direction
or a temporary period of caution and “feeling the
Among other claims, the US argues that the stones” before reforms speed up again.
strategy favors domestic firms in the allocation
of subsidies and forces foreign firms to transfer What’s next in China’s reform process and the
technology as a condition for market access. impact of recent events on China’s development will
only become clearer with time, particularly as the
As a result, the US also argues that China is country is pressured by the US to adopt structural
violating its WTO commitments, and that the market-based reforms.
country should adopt market-based reforms to level
the playing field. Yet, despite external pressure to pursue certain
reforms – or because of it – China is determined to
In defense of its development model, Beijing has find and pursue its own reform path – just as it did
even gone as far as calling for WTO reforms that in the past. As Xi said on the 40th anniversary of ‘the
“respect members’ development models”, which reform and opening up’, “No one is in the position
would grant China more leeway in implementing to dictate to the Chinese people what should and
statist and protectionist policies. should not be done”.■
However, recently there have been signs that Article by China Briefing, which is produced by Dezan Shira &
Beijing is willing to compromise and address Associates. The firm assists foreign investors throughout Asia
Washington’s concerns. from offices across the world, including in in China, Hong Kong,
Vietnam, Singapore, India, and Russia.
For example, in March China’s National People’s
Congress passed a new foreign investment law. This
South China Business Journal 8
is state-owned enterprise (SOE) reform, with the foreign business community, such as by explicitly
role of SOEs in resource allocation advancing while banning forced technology transfers.
the role of the private sector is receding. One of the
reasons for this is that SOEs enjoy more preferential Critics, however, say that many of the provisions
access to credit than the private sector. in this document are still quite general, and the law
itself will not take effect until January 1, 2020.
Although the government’s deleveraging campaign
has reduced financial risks, it has hit the private ‘Feeling the stones’: What to make of
sector harder than the state sector. This is despite China’s reforms record
the private sector being three times more efficient
on average than the state sector and contributing Since 2013, the progress of reforms has been
close to two-thirds of China’s GDP growth. mixed. On one hand, China has made clear progress
in some areas, such as improving the business
In terms of FDI, even with the easing of restrictions environment and opening some new sectors to
with the introduction of the new negative list, there foreign investment.
are claims that there is still an unlevel playing field
with domestic firms being given preference over On the other hand, however, the state has
foreign firms. reasserted itself rather than given the market the
decisive role. Xi, for instance, has called for SOEs to
This is exemplified by the ‘Made in China 2025’ become bigger, stronger, and more efficient, while
industrial strategy, which is at the center of the the Communist Party has increased its presence in
trade war with the US. both state-owned and private firms in recent years.
Made in China 2025 is an industrial policy issued Given China’s mixed record of economic reform
in 2015 that targets 10 high-tech sectors under the since Xi came to power, it is not yet clear whether
guidance of the Chinese state. the statist turn is a fundamental change in direction
or a temporary period of caution and “feeling the
Among other claims, the US argues that the stones” before reforms speed up again.
strategy favors domestic firms in the allocation
of subsidies and forces foreign firms to transfer What’s next in China’s reform process and the
technology as a condition for market access. impact of recent events on China’s development will
only become clearer with time, particularly as the
As a result, the US also argues that China is country is pressured by the US to adopt structural
violating its WTO commitments, and that the market-based reforms.
country should adopt market-based reforms to level
the playing field. Yet, despite external pressure to pursue certain
reforms – or because of it – China is determined to
In defense of its development model, Beijing has find and pursue its own reform path – just as it did
even gone as far as calling for WTO reforms that in the past. As Xi said on the 40th anniversary of ‘the
“respect members’ development models”, which reform and opening up’, “No one is in the position
would grant China more leeway in implementing to dictate to the Chinese people what should and
statist and protectionist policies. should not be done”.■
However, recently there have been signs that Article by China Briefing, which is produced by Dezan Shira &
Beijing is willing to compromise and address Associates. The firm assists foreign investors throughout Asia
Washington’s concerns. from offices across the world, including in in China, Hong Kong,
Vietnam, Singapore, India, and Russia.
For example, in March China’s National People’s
Congress passed a new foreign investment law. This
South China Business Journal 8
