Editorial | Laws hammer home the Beijing message
- Moves to cut red tape and to protect interests of foreign firms and investors show China is serious in its attempts to provide a level playing field
China is finding it hard to shake off perceptions that the playing field is strongly tilted against private and foreign companies, and the latter are not yet convinced by Beijing’s efforts to address them. These include a new law from January 1 aimed at cutting red tape and levelling the field, passed last week after positive feedback from American officials; and a new foreign investment law, also to take effect on the same day, to protect the interests of foreign firms and investors that will include a ban on forced technology transfer.
Analysts and businessmen cite two reasons for scepticism about these measures. One is the tendency of local officials to run their own agendas and the other is the lack of an independent, transparent judiciary that guarantees a fair hearing of grievances. This raises the question whether China has done enough to open up its economy. A strengthening of party supervision under President Xi Jinping has also led to concerns among foreign investors, although Xi has stressed China’s determination to further open up. It will come as a surprise to many therefore that it has leapfrogged from 45th to 31st place in a World Bank index on the ease of doing business.
This suggests Beijing is hearing the criticism and stepping up efforts to meet foreign concerns. Evidence of that is a comparison of the three years to 2018, when Beijing enacted just six reforms, with this year. So far it has implemented seven reforms, including streamlining the process for starting a business and registering property. Next year it plans eight, including making it easier to access electricity and enforce contracts. The World Bank said China had also made progress on construction permits and resolving insolvency.
That said, while China may now be seen as aggressive when it comes to regulatory reform, implementation remains problematic. But it deserves credit and encouragement for moving in the right direction. Beijing now needs to follow through firmly with local officials and convince businessmen it means what it says. The new laws are timely given the current plenum which, though focused on modernisation and strengthening of China’s governance model, can be expected to debate the direction of the economy and the push for further liberalisation.