China-US trade war: New Chinese law seeks to address concerns

China bans forced technology transfers

China-US trade war: New Chinese law seeks to address concerns

China's National People's Congress (NPC) on Friday rubber stamped a new foreign investment law in a bid to address long-standing problems faced by foreign firms and investors operating in China - such as unequal market access, forced technology transfers and unfair treatment when it comes to public procurement.

The law, to replace existing regulations for joint ventures and wholly foreign-owned enterprises, is created to ease concerns among foreign companies about the difficulties they face operating in the world's second-largest economy.

"The newly-adopted legislation is a fundamental law in lifting China toward a new stage of high-level opening up in the new era", said top legislator Li Zhanshu.

Many in the business community in China see this law as a kind of sweeping set of intentions rather than a specific, enforceable set of rules, he says.

Both Beijing and Washington are still working towards a trade agreement after a year in which they were locked in a tit-for-tat exchange of punitive tariffs.

He said the government will further shorten its foreign negative list to allow more foreign investors to invest in various industries in the Chinese market.

The changes will ensure that foreign investors will enjoy the same privileges as Chinese companies in most sectors, except those placed on a "negative list".

"The vague language leaves much room for interpretation and makes compliance hard", he added. Apple (AAPL) and NVIDIA (NVDA) have warned that China's slowdown is hurting their earnings, and Advanced Micro Devices (AMD), Micron (MU), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOG) have also been impacted by the world's two largest economies' trade issues.

Editor's note: Pan Deng is an assistant professor at the China University of Political Science and Law.

The speed at which this process was concluded is clearly a response to Beijing's ongoing trade dispute with Washington, Katja Drinhausen, a researcher at the Berlin-based Mercator Institute for China Studies, told DW.

The passing of the new foreign investment law came after Trump's administration tried to cool down the talk about the imminent trade deal.

"Moreover, we can deploy quantity-based or price-based policy tools such as reserve requirements and interest rates".

The central bank has cut banks' reserve requirement ratios (RRR) five times since previous year, with a two-stage RRR cut in January releasing a total of 1.5 trillion yuan ($223.23 billion) into the financial system.

An across-the-board cut in borrowing costs could also risk another flare-up in debt and speculative activity like that in the wake of the 2008-9 global financial crisis.

The law, which passed on March 15, will take effect on January 1, 2020.

The premier announced on March 5 that the Value-Added Tax for the manufacturing sector would be cut to 13 per cent from 16 per cent. Value-Added Tax for the transport and construction sectors will be reduced to 9 per cent from 10 per cent.

In a bid to prevent its citizens from seeing and obtaining information that would disadvantage the nation's ruling Communist Party and government, China has blocked access to many overseas websites like Google search, YouTube and Facebook.

Altre Notizie