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Chinese goverment to shorten negative list

2019-04-24

Source: Global Times    Published: 2019-4-19


The views of foreign investors will be given consideration on how China revises its negative list for investments, but China will pace its opening up process, Chinese analysts said on Thursday.


With the release of a new negative list less than two months away, Chinese analysts from the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM), as well as from the legal and industrial sectors, discussed how China will update its negative list this year.


In March, Chinese Premier Li Keqiang announced that China would revise and issue the negative list for foreign investment by the end of June at the Boao Forum for Asia annual conference in South China's Hainan Province.


Bai Ming, deputy director of the Ministry of Commerce's International Market Research Institute, said that negative list revision will involve the NDRC and the MOFCOM, and foreign companies and industry associations will also be consulted.


"It has become increasingly difficult to shorten the negative list. More efforts will go into the model of cooperation, shareholder restrictions, and special provisions affiliated with existing texts," Bai told the Global Times on Thursday. "It is the depth of the list that will be highlighted."


China has been routinely slashing its catalogue governing foreign investment in recent years. In 2018, such a catalog appeared for the first time in the style and text of a negative list, borrowing from similar approaches used in China's pilot free trade zones.


In the 2018 version, the number of items on the negative list was slashed to 48 from 63 in 2017. An item on the list meant foreign investors are still prohibited or restricted.


Yan Yiming, a Shanghai-based lawyer who frequently deals with foreign investors, told the Global Times on Thursday that whether some changes will be made on shareholder caps [for certain industries] will still dominate foreign investors' attention.


"We already knew that the negative list will be updated, so it is reasonable to expect some adjustments in the 2019 list. Judging from the course China has taken in recent years, adjustments can only mean some shareholder caps will be further relaxed," Yan said.


"Foreign companies also care about if an item will be moved from the prohibited category to restrictive, which means some business is possible," Yan noted.


For those in business, the significance of the wording of the negative list can never be understated.


Riding on China's continued wave of opening-up measures, German automaker BMW became the first foreign company to take a controlling stake in a joint venture in China in 2019.


But what shocked the Chinese automobile industry was that BMW will increase its stake in its Chinese JV with partner Brilliance Automotive to 75 percent from 50 percent, one observer of the automobile industry told the Global Times.


"Automobile industry players had wanted to fight over the shareholder caps issue bit by bit, percent by percent," said the observer, who declined to be named. "BMW's stake increase and Tesla's complete share mean the pace of opening up is much faster than expected."


Reduced shares not only diminishes control of the Chinese co-owner over JV but also cuts their revenues.


Top consideration


Countries like the US are demanding greater market access in China for its firms. But experts said China's concerns come first.


"Security, standards, consistency with international norms will be considered by decision-makers in order of importance," Bai said.


Along with China's growing capacity to safeguard its economic security, the considerations in revising the negative list are also evolving, Bai noted.


"China, out of its own needs, should provide greater market access to foreign companies. Foreign companies, on the other hand, are demanding access to certain--not all--markets. The needs and demands all evolve," Bai said.


According to the latest comments on progress in the negative list, which was revealed at a MOFCOM press conference on April 4, spokesperson Gao Feng said revision work is underway with realizing sole foreign ownership in more sectors being pushed.


At the same time, Gao said the ministry is removing restrictive measures beyond the domain of the negative list to ensure universal market access for foreign and domestic companies.


Wan Zhe, chief economist at the International Cooperation Center of China's National Development and Reform Commission, said constantly revising a negative list is about reforming the role of the government and leaving more matters to the market.


"The negative list will shrink because China's opening up will be an irresistible trend," Wan said, predicting greater opening up in the financial sector.


More efforts are needed to push forward the negative list approach and improve its quality, Wan said.


"Opening up is also closely connected with the establishment and improvement of laws and regulations in some industries where such rules did not previously exist," Bai said, noting that such efforts must precede opening up.


"It is like visiting a traditional Chinese courtyard. Some alleyways and walls are still under construction, and we want our guests to arrive in reception rooms rather than bedchambers," Bai said.


Wan Zhe is a visiting fellow of Chongyang Institute for Financial Studies at Renmin University of China.

Key Words: China   trade   opening up   Wan Zhe  

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