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Why China’s opening up to more foreign investment is unlikely to narrow its trade differences with the US
- Beijing and Washington are misdiagnosing each other’s complaints as economic in nature rather than political, and China’s new ‘negative list’ of restricted sectors is a continuation of this trend
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China’s National Development and Reform Commission and Ministry of Commerce has released its new “negative list” governing foreign investment in restricted or prohibited sectors.
In it, Beijing moved to open a number of areas previously closed to foreign investment, particularly in telecommunications, logistics, energy and culture, by reducing the number included from 48 to 40.
The release of the list, while long in the works, came after a meeting between US President Donald Trump and Chinese President Xi Jinping at the G20 Summit in Osaka resulted in the resumption of bilateral trade talks and some nascent concessions on both sides.
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While many saw the passage of China’s Foreign Investment Law as an answer to US demands around increased market access and a level playing field for US companies, the list is ultimately what dictates which sectors are open or closed to foreign investment.
The reforms embedded in China’s new nationwide negative list are encouraging developments for the country’s investment climate, but will not alter the underlying disparity – and resulting friction – between the two countries’ political models.
For example, it includes requirements on joint ventures, ownership caps and outright bans on investment. Though detailed and cumbersome, it is the major means by which China will take steps to fulfil its pledges to open up additional sectors.
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Some steps are significant.
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