The annual meeting of China’s top lawmakers and political leaders/advisers, the “Two Sessions,” is considered one of the biggest events on the Chinese political and economic calendar, and allows Chinese people and even the world to review the government’s work over the past year and hear its economic and social targets for the year to come.
The ‘Two Sessions’ include the plenary sessions of the National People’s Congress (NPC), the country’s top legislature, and the Chinese People’s Political Consultative Conference (CPPCC), a body that advises the government on a range of issues. The CPPCC session started on March 3, and the NPC session began on March 5. — edited from Caixin Global
Hear the Unique Voices of Chinese Entrepreneurs
The Two Sessions ended on 15 March, 2019. While coverage has mainly focused on GDP, tax cuts, military spending, etc., it also notes that entrepreneurs were a special voice at the meetings. Here’s what some of the country’s top tax payers and industry leaders had to say about China’s business and technology development:
- Zhang Yunyong, President of the China Unicom Research Institute:
“5G infrastructure should be co-constructed and shared by more enterprises in order to avoid waste of resource .”
- Lei Jun, Founder of Xiaomi:
“Accelerate the applications of Internet of Things (IoT), especially in the fields of driver-less cars, healthcare industries, and smart agriculture.”
- Robin Li Yanhong, CEO of Baidu:
“Artificial intelligence should be expanded to new arenas. For example, transportation data can be shared and utilized for establishing a smarter system. Meanwhile, AI can help hospitals better manage their medical records and scientific research.”
- Pony Ma Huateng, CEO of Tencent:
“Promote 5G and IPv6 commercialization, cloud service for industrial, financial, educational, healthcare, and governmental sectors.”
- Zhang Jindong, Chairman of Suning:
“Develop smart logistics system to enhance the efficiency of express/logistic industries.”
- Yang Yuanqing, CEO of Lenovo:
“We need more specific policies and incentives to boost IoT.”
- Yao Jinbo, CEO of 58.com:
“Low fertility rate is a long-term challenge for the government. To relieve the anxiety of female employers, the government could cut their taxes or cover more educational expenses. Only by doing this will young people become willing to spend and buy apartments.”
- Yu Minhong, President of New Oriental Education and Technology Group:
“Disabled children should have specialized social and educational support at school. Besides, the government could sponsor families from Western China to have enough reading material.”
- Ding Lei, CEO of NetEase:
“Live-streaming, VR, and AI could all be used to provide good educational resources to regional areas of China.”
- Dong Mingzhu, chairwoman of Gree:
“Raise the minimum income tax threshold to 10,000 yuan per month (2,100 AUD).” (The current benchmark is 5,000 yuan per month)
- Fu Jun, President of Macrolink Group:
“Private companies should not be discriminated in financial markets.”
- Wang Fengying, president of Great Wall Automobile:
“Government should protect overseas properties of Chinese companies.” —edited from supchina.com & wuxiaobopd
China Passed New Foreign Investment Law
Apart from the voices of Chinese entrepreneurs, the global capital markets and investor communities paid special attention to the new move Chinese Government made on foreign investment.
On 15 March, 2019, China’s National People’s Congress closed out the Two Sessions meetings by passing a new Foreign Investment Law. It will come into effect on January 1, 2020 and is a new guiding document to govern foreign investment in China.
The new Foreign Investment Law aims to address common complaints from foreign businesses and governments, such as by clearly banning forced technology transfers.
The Foreign Investment Law will govern the activities of all individual foreign investors and foreign-invested enterprises (FIEs), which include both wholly foreign-owned enterprises (WFOEs) and joint ventures (JVs). It also includes investors from Hong Kong, Macau, and Taiwan.
The new law replaces three previous laws, namely the Wholly Foreign-Owned Enterprises Law (also known as the Foreign-Capital Enterprises Law), the Sino-Foreign Equity Joint Ventures Law, and the Sino-Foreign Contractual Joint Ventures Law. It pledges to “build a market environment of stability, transparency, predictability, and fair competition” for foreign investors.
In the closing press conference of the Two Sessions, Premier Li Keqiang explained that the law is part of China’s “fundamental state policy” to further open up to the world. According to Li, “This piece of legislation is designed to better protect and attract foreign investment through legislative means.”
Specifically, the Foreign Investment Law contains a number of provisions that pledge to give foreign investors a level playing field with their domestic counterparts.
For example, it bans Chinese JV partners from stealing IP and commercial secrets from their foreign partners via protections included in Article 22. Further, it not only prohibits government officials from using administrative measures to pursue forced technology transfers (高亮部分突出设计哦)(also Article 22), but also makes them criminally liable if they do so (Article 39).
Besides IP considerations, the law says that foreign investors will receive equal treatment when applying for licenses (Article 30) and participating in government procurement (Article 16) – two common complaints from the international business community. According to Article 15, foreign investors will also be given equal opportunity to participate in the formulation of standards.
In terms of managing foreign investment, Article 4 of the law says that the state should use the Negative List to ensure reestablishment national treatment. It means that foreign investors will be treated at par with domestic investors during the initial stages of setting up. —edited from China Briefing
What Australian Investors Should Look At
Australian investors will be watching closely for updates on the health of Chinese economy and China’s demand for coal and iron ore. But Australian companies will also be watching new foreign investment rules which are being fast-tracked through the legislature.
Like their US and European counterparts, Australian businesses are somehow sceptical about the new rules which bans forced technology transfer and government interference in foreign business practices.
“We are concerned that the drafting of the Foreign Investment Law is being squeezed between the normal legislative process and the negotiation table with the US, in part to address the trade conflict,” said Mats Harborn, President of the European Union Chamber of Commerce in China.
“This law will have major ramifications for all foreign companies in China for the foreseeable future, so the drafting process must be given the time and attention due to such an important piece of legislation, and proper consultation periods should be respected.”
Morgan Stanley chief China economist Robin Xing said China was expected to lower the GDP growth target to between 6 and 6.5 per cent. This would fall within the government’s target to double 2010’s GDP level by 2020.
But ANZ economists predicted China would launch an aggressive growth target of around 6.5 per cent for 2019, which marks the 70th anniversary of the People’s Republic of China. They expect the country’s central bank to maintain low interest rates by continuing to reduce the minimum amount of capital banks must hold.
Investors will also be hoping for additional fiscal stimulus, which would drive up commodity prices. China and Australia have denied reports that the port of Dalian in China’s north-east had banned Australian coal imports, but restrictions are in place. —edited from afr.com
The new law is not expected to function like a magical solution at one go, however, from the initiative to ban the forced technology transfer and loose the governmental censorship on foreign capitals, Chinese government seems to be quite active on implementing its opening up strategies.
Edited by Joreal Qian