China Urged to Accelerate Reforms to Allay Investor Concerns and Secure US-China Bilateral Investment Treaty
October 23, 2015 – China needs to implement more ambitious economic reforms or risks significantly delaying a bilateral investment treaty (BIT) with the United States, said a report released today by the American Chamber of Commerce in China with support from the U.S. Chamber of Commerce. Titled China’s Investment Environment: Overcoming Impediments to the US-China BIT, the report also warns that several policy initiatives currently being considered in China could undermine the impact of the reforms and the prospects for a treaty between the two countries.
“Foreign business is indeed growing anxious about the future of doing business in China, and strong actions that assure the direction of China’s reforms are necessary to attract and retain foreign investment,” said AmCham China Chairman James Zimmerman. “This is especially important given the progress of global trade agreements such as TPP, which raise the global standards for bilateral trade and investment protections even higher. American business in China already represents billions of dollars of investment, employs hundreds of thousands of employees, brings to the market advanced technology and innovative products and services, and is prepared to invest more if they can compete on a level playing field.”
While acknowledging the complexity of the reform process and initial enthusiasm for early developments such as the pilot free-trade zones and draft Foreign Investment Law, the report says that economic reform efforts have not kept pace with the continued decline in investor sentiment caused not only by global competitiveness and macroeconomic trends, but critically by widely perceived discriminatory treatment.
The report argues that the BIT is a significant opportunity to further drive reforms within China’s investment regime to the benefit of the domestic economy, and help China achieve its own social and economic goals. An effective and successful BIT would result in increased US investment into China, leading to higher value products and lower prices for consumers, as well as the introduction of valuable managerial and technical expertise into China, the report says. Similarly, it would also boost the confidence of Chinese investors in the United States and support the growth of China’s outbound foreign investment, bringing job creation and other economic benefits to the US.
It notes that Chinese investment in the US continues to increase, having in recent years surpassed US investment into China, highlighting the relative openness of US markets in comparison to the market access restrictions faced by many AmCham China member companies in China. FDI remains an important component of the US economy, and its open environment has allowed Chinese investors to find great success in the US. The report expresses hope that progress announced during Chinese President Xi Jinping’s recent visit to the US regarding the shortening of the two countries’ respective negative lists will accelerate so they can conclude negotiations on a high-standard and comprehensive BIT as soon as possible.
However, the continued presence of discriminatory industrial policies and opaque investment approval procedures, the lack of effective administrative and legal recourse if an investment or licensing approval is conditioned or denied, the lack of transparency and due process in enforcement, and the increasing injection of national security-based restrictions in rules and regulations governing China’s economy, have led to increased concern within the foreign business community, the report says. As well as short negative lists, therefore, the report says the treaty will need to address several other issues of increasing concern to the chambers’ members:
Requirements for transparency in administrative procedures and due process in enforcement and dispute settlements
Limitation of performance requirements, such as data and IP localization and expanded protection against forced technology transfer
Disciplines on SOEs and designated monopolies
Narrowed definition of national security to limit overly broad application in economic regulations
Guarantees for non-discriminatory development and application of standards
Furthermore, to provide assurances on the direction of the reforms to create momentum and public support for the BIT and keep both countries on a path to deeper economic integration and stronger overall ties, the report urges the Chinese government to implement further reforms in the near term that will create meaningful improvements in the operating environment for foreign-invested enterprises. Market openings and reforms by the Chinese government prior to the conclusion of a BIT would benefit the Chinese economy and consumers, and provide tangible indicators of China’s intent to achieve meaningful market access for foreign companies, it says.
Regarding the recent Trans-Pacific Partnership agreement, the report welcomes and encourages China’s accession as soon as China is ready to meet the TPP’s obligations.
And bilingual version of the report can be found Here.
About AmCham China
The American Chamber of Commerce in the People's Republic of China is a non-profit, non-governmental organization whose membership comprises more than 3,800 individuals from over 1,000 companies operating across China. The chamber's nationwide mission is to help American companies succeed in China through advocacy, information, networking and business support services. AmCham China is the only officially recognized chamber of commerce representing American business in mainland China. With offices in Beijing, Tianjin, Dalian, Shenyang and Wuhan, AmCham China has more than 60 working groups, and holds more than 300 events each year. Visit: www.amchamchina.org
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