Friendly law will attract more investors
As the Ministry of Commerce noted recently, with the Chinese market further opening up to foreign investment, the commitment to fully implement the new Foreign Investment Law, enacted in January, will prove critical. Given the attempts of the United States president and other leaders to blame China for the US administration’s lackadaisical response to the novel coronavirus pandemic, Washington will pressure American (and perhaps European) enterprises to “disinvest” from China for alleged “national security” reasons.
While some US companies will no doubt succumb to such pressure, it is unlikely that this will lead to a significant drop in the involvement of American or European enterprises in China. First, to abandon a long-established supply chain is a very costly affair for any enterprise. Second, the huge Chinese market is much too important for a global company to forego for the sake of a cheap political gambit. And while the US State Department is busy trying to convince its “allies” to do the same, it is having somewhat mixed results.
Given this deplorable situation, it is all the more important that China take all the necessary measures to meet some of the basic requirements for US enterprises to function effectively in the country. The economic benefit to China is quite obvious. Thanks to their technologies and know-how, foreign enterprises operating in China will only add to the ability of the country to develop further. But they must feel comfortable with regard to the security of their technologies and their intellectual property if they are to remain active in China. Helping this process is the opening of new free trade zones and free trade ports as well as the streamlining of the procedure of establishing a business in China.
As for foreign enterprises’ concerns, Premier Li Keqiang has addressed them in the Government Work Report he delivered to the top legislature on Friday, by laying emphasis on “promoting higher standard opening-up and stabilizing the overall performance of foreign trade and foreign investment” with a large coverage.
Recently, China has also decided to liberalize the entry of foreign companies into the financial services sector. While this will help provide significantly more investment capital for fueling China’s industrial development, a watchful eye is required to make sure finance does not create its own laws.
As we have experienced all too long in the West, the expansion of financial products and instruments has far outstripped the needs of the underlying industrial economy. Without appropriate regulation, the financial services sector can easily develop into a “bubble economy” and thus threaten the gains made by the real economy. But I think Chinese regulators are aware of the danger, and can keep things under control.
Smoothing the way for foreign investment has important political implications, too. People in industry are generally less ideologically fixated than are other layers of the political spectrum. And business layers, in general, have always tended to be more positively inclined toward working with China.
After more than four decades of reform and opening-up, China has become increasingly open toward foreign businesses, while the interest of business layers in maintaining a good relationship with China has increased. This was also the case in the US-China trade disputes, due to which US businesses exerted pressure on the administration to not go overboard with the “maximum pressure” campaign.
And given the attempt by the “China hawks” in the US administration to whip up a McCarthyesque anti-China atmosphere in the US, American businesses may well serve as a voice of reason and prevent any extreme moves by the White House that might spark an even bigger conflict.
While it is too early to tell where the US administration will be heading as we move toward the critical presidential election in November — or what the result will be — it really behooves China to retain all of its friends on this side of the ocean, and many of those are to be found in the US business community. The author is the Washington bureau chief for the Executive Intelligence Review and a non-resident senior fellow at the Chongyang Institute for Financial Studies, Renmin University of China. The views don’t necessarily reflect those of China Daily.