A coffee shop is not a standard venue for the Chinese government to deliver policy messages.
But as complaints grow louder that Beijing is becoming increasingly harsh towards foreign businesses, the government’s information office has tried a novel approach to getting its message across: eschewing the staid conference room in a Soviet-style government building for the more cosy space of a Starbucks in Beijing to tell foreign journalists that China’s arms remained open to foreign investors.
“Once the door is open, it won’t be closed,” said one senior official from the National Development and Reform Commission (NDRC), who was joined by a department director from the Ministry of Commerce.
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The NDRC official declined to be named as the event was more of a backgrounder than a formal press conference. He said he had full confidence in China’s ability to woo foreign investors “regardless of changes in the global situation”.
Plenty of questions arose on the other side of the table, literally. The nine journalists attending the event pressed for answers on a range of issues, including China’s curbs on outbound investments, the future policy towards the yuan exchange rate, and the identity of a foreign carmaker being investigated by China for alleged anti-trust activities.
The two officials declined to address specific cases but said Beijing was not – and would not – discriminate against foreign businesses.
While China’s 1.3 billion consumers continue to generate sales and profits for foreign businesses, including Apple and Starbucks, China is also becoming a more challenging place in which to operate for many overseas businesses, due to rising costs, fierce competition, extensive regulatory requirements and alleged selective enforcement of business laws.
The NDRC, for instance, has been imposing big fines on a number of foreign businesses. The agency has said it was looking into a large foreign carmaker for antitrust violation although it has yet to name the target.
Beijing’s latest capital account control measures have also made it harder for foreign firms to remit money abroad.
On the other hand, China is in need of long-term capital inflow, as well as technologies, to help evolve its economy. The Central Economic Work Conference, a key policy-setting meeting by China’s top leadership that ended on Friday, recognised that foreign enterprises had played “an important role” in the domestic economy.
The exodus of hot money in recent months has made it even more urgent for Beijing to lure long-term investors. “China remains very welcoming to inflows of foreign funds and businesses, but on increasingly restrictive terms,” said Fraser Howie, director of Newedge Financial in Singapore.
Howie, a co-author of Red Capitalism: The Fragile Financial Foundations of China’s Extraordinary Rise, said the “pain and hassle of dealing in China” had been justified when the nation’s market was expanding. But the situation had changed “where the local economy is much tougher, [and] companies are feeling the pressure of more restrictive and China-first policies”.
For instance, Chinese financial institutions have been instructed to reduce reliance on foreign software vendors.
In addition, Chinese businesses are often off-limits for foreign buyers even though Chinese companies are snapping up technologies in developed economies.
“Businessmen and politicians from Europe have a point when they say that access is asymmetric. It is much easier for Chinese companies to buy up companies in Europe than it is for European companies in China,” said Louis Kuijs, head of Asia research at Oxford Economics.
Kuijs said China could do more to grant foreign firms proper access to its services markets, and ease restrictions on foreign firms seeking mergers in China, while cutting interventions and subsidies.
Read the original article on the South China Morning Post.
