The current measures, according to Li Keqiang, are aimed at further increasing the openness of China’s economy to the outside world.
The day after the talks between US President Donald Trump and Chinese President Xi Jinping in Osaka, following which the parties decided to take a pause in the trade war, China published a new stop list for foreign investment.
Compared to last year’s similar document, the list of sectors closed to foreign investment was reduced from 48 to 40. And in pilot free-trade zones of the sectors prohibited for foreign capital, only 37 are left at all.
The document jointly issued by the National Development and Reform Commission (NDRC) and the Ministry of Commerce of China will come into force on 30 July. For foreigners, access is facilitated or restrictions are lifted altogether in such areas as gas and heat pipeline infrastructure in cities with a population of over 500,000, film distribution, value-added telecommunications, oil and gas production, agriculture, and the extraction of certain types of metals.
Additionally, foreigners are not required to obtain special permission from regulators to invest in industries that are not included in the stop list. The NDRC promises to fully liberalise access to sectors not included in the new list by the end of the year.
The financial sector is still present in the updated stop list. The ceiling of foreign capital in brokerage companies, funds, companies operating in futures markets is still 51 percent. Restrictions also apply to life insurance companies. Previously it was planned that restrictions on the share of foreign capital in these areas will be removed after 2021.
However, Chinese Premier Li Keqiang, speaking at the WEF Summer Davos in Dalian, said that this area would be liberalised ahead of schedule, already in 2020.
Moreover, the Chinese premier promised that to foreign rating agencies, companies dealing with credit information and payments will be applied the same administrative regime as their local competitors.
This means that very soon global financial corporations, such as UBS Group AG, JPMorgan Chase & Co., Nomura Holdings Inc., and Credit Suisse Group AG will be able to get a full share in joint ventures in China.
Despite the fact that during his speech in Dalian, Li Keqiang did not mention US President Donald Trump, a number of Western media have tied up the new measures announced by China as a reaction to the truce reached between the US and China in the trade war.
However, according to Chen Daofu, Director and Deputy Director at the Financial Research Institute at the Development Research Centre of the State Council of the People's Republic of China, the current liberalisation is a logical continuation of Chinese economic and financial reforms. And they do not depend on relations with other countries, the expert said.
“First of all, reforms and openness, especially openness is a necessary condition for the development of the Chinese economy. Economic and financial successes achieved in 40 years are impossible without openness to the outside world. China has actually achieved success, including due to its involvement in global processes. And in the future, the development of China is inseparable from the outside world. Therefore, if China is going to grow further, the integration into the world community will undoubtedly increase. Moreover, with the development of the Chinese financial system, there are more opportunities for its regulation and control. This is also a prerequisite for further increasing openness. China has spent three years fighting systemic financial risks, has developed new approaches to managing financial processes, so the necessary conditions have now been created for further expanding openness to the outside world. Therefore, both in the short and long-term, China will inevitably integrate more and more into the world economy, and the trade war with the United States will accelerate this process”.
According to the Ministry of Commerce of China, in the first 5 months of 2019, the volume of attracted foreign direct investment in dollar terms has increased by 3.7 percent, in annual terms to $54 billion, while direct investment from the United States, despite trade contradictions, increased by 7.5 percent.
While the United States and a number of EU countries are trying to limit their high-tech industries from Chinese investors, by contrast, China is expanding access for foreign capital in these sectors.
Based on the analysis of the updated stop list, it can be concluded that the Chinese authorities are focusing on liberalising access for foreign capital in such areas as components for the 5G telecommunications infrastructure, semiconductors, chips, and cloud computing.
Views and opinions expressed in this article are those of the speaker and do not necessarily reflect those of Sputnik.
The views and opinions expressed in the article do not necessarily reflect those of Sputnik.