China poised to open markets ‘beyond expectations’ as tough US tariffs loom, envoy says
Consul General Zhang Qiyue said barriers will be removed or eased for foreign investors in China’s financial sector and that market entry standards will be unified for banks
A Chinese envoy to the US offered easier access to China’s markets for foreign investors, promising reforms “beyond expectations”, as Washington moves to institute punishing trade and other sanctions against Beijing for rules that restrict foreign participants.
Speaking at a China General Chamber of Commerce USA event, New York-based Consul General Zhang Qiyue said barriers will be removed or eased for foreign investors in the country’s financial sector and that market entry standards will be the same for Chinese and foreign banks.
“Many more measures will be introduced this year and some of the measures will be beyond the expectations of foreign companies and investors.”
Beijing is facing a groundswell of acrimony from US policymakers and members of Congress over an ever-increasing trade imbalance in China’s favour and restrictions on US companies operating in the Asian country.
US President Donald Trump accused the country of actively undermining American national security.
Lawmakers have portrayed China’s support for “national champions” in the tech sector and efforts to acquire advanced technology from US companies as part of a plan to gain military advantages over Washington.
Trump is expected to announce imminently the imposition of a package of as much as US$60 billion worth of annual tariffs on telecommunications equipment, consumer electronics and other goods from China, the result of a months-long investigation into rules faced by foreign companies operating in the country.
The White House will unveil the sanctions on Thursday, Agence-France Presse reported, citing spokesman Raj Shah.
In August, US Trade Representative Robert Lighthizer launched an investigation under section 301 of the US Trade Act of 1974 into the Chinese regulations, which force US companies operating in the country to transfer technology and intellectual property rights to local business partners.
Soon afterward, USTR began taking testimony from US companies, seeking verification that the Chinese government uses unfair tactics on US companies’ operations in China “to require or pressure the transfer of technologies and intellectual property to Chinese companies”, according to USTR documents.
“Our view is we have a very serious problem losing our intellectual property, which is the single biggest advantage of the US economy,” Lighthizer said in a congressional hearing on Wednesday.
“We are losing that to China in ways that aren’t reflective of the underlying economics.
“As of today, the administration hasn’t been satisfied with the types of responses we’re getting from China,” the top US trade negotiator said.
Zhang’s comments echo those made by China’s Premier Li Keqiang at the end of the country’s National People’s Congress, an annual parliamentary convocation, earlier this week.
“We will fully open up the manufacturing sector, with no mandatory technology transfers allowed, and we will protect intellectual property,” Li told a press conference wrapping up the NPC in Beijing.
Zhang provided more detail on the scope of market openings China’s government is planning for foreign investors.
“The general manufacturing sector will be completely opened up and access to sectors like telecommunications, medical services, education, elderly care and new energy vehicles will be expanded,” Zhang said in New York.
“China will phase in the opening up of bank card clearing and other markets, lift restrictions on the scope of operations of foreign-invested insurance companies and ease or lift restrictions on the share of foreign-owned equity in companies in sectors including banking, securities, fund management, futures and financial asset management.”
The Trump administration may need more than pledges to liberalise particular sectors of China’s economy to stand down from sanctions it is expected to announce soon.
After the US leader finished his state visit to Beijing in November, Vice Finance Minister Zhu Guangyao announced changes that included raising the limit on foreign ownership in joint-venture firms involved in futures and asset management to 51 per cent from the current 49 per cent.
That was not enough to divert Trump from his plan to sanction China.
Since his visit to Beijing, Trump has only drawn closer to White House adviser Peter Navarro, who last week said the president is “courageously” taking steps to counter “China’s theft and forced transfer of intellectual property”.
“China could be more specific on the timetable for the financial liberalisation,” Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, told the South China Morning Post in a recent interview.
“They’ve announced the intention to raise these caps, but I don’t think they’ve put out the implementing regulations that will allow it, and they haven’t been fully clear about in which of these financial subsectors the caps are going to be eliminated completely,” Lardy said.
“This makes it difficult for financial institutions to plan.”
These moves might be too little and too late, according to US politicians and advisers.
Addressing the US’s record US$276 billion (HK$2.16 trillion) trade deficit with China last year, Edward Cox, chairman of the New York Republican State Committee, said Beijing’s status as a geopolitical competitor makes such an imbalance politically unsustainable.
Trade deficits the US carried with Japan, South Korea, and European countries since the mid 20th century had geo-strategic goals, making trade deficits with them more acceptable to the US government, Cox, who spoke at the China General Chamber of Commerce event, told reporters after his presentation.
“The cold war was going on and these were our allies,” Cox said. “We wanted to show that free markets and capitalism worked and so we were very happy to be generous in that process. China’s not an ally. We are partners in trade and he have relations, but we’re not allies.
“The deficit [with China is] more serious, particularly when you take that back even more into the geopolitical realm and the things we have to deal with, that is the Korean Peninsula issues, the South China Sea issues, the growing [Chinese] blue-water navy, the shore-to-sea missiles that are very effective that China’s developing.”
The USTR may announce tariffs as high as 100 per cent on some goods from China, former acting deputy US trade representative Wendy Cutler said in a conference call.
“The administration has been clear that when it takes action under 301 it won’t be limited to tariffs and at a minimum it will include investment restrictions in an effort to set up a reciprocal investment system that would restrict Chinese investment in the United States, trying to mirror Chinese practices,” Cutler said.
“We should all get ready for some serious trade action in the coming days.”
Cutler, who now serves as managing director of the Asia Society Policy Institute’s Washington office, was responsible for negotiations leading to the Trans-Pacific Partnership under former President Barack Obama. Trump pulled Washington out of the TPP soon after taking office last year.