China and the United States are joining forces to establish a more stable and predictable environment for businesses, according to Chinese Commerce Minister Wang Wentao. Following the visit of U.S. Commerce Secretary Gina Raimondo to China last summer, the two nations have committed to regular meetings at various levels. Discussing this ongoing communication during a press conference, Wang emphasized the goal of fostering a conducive atmosphere for economic and trade cooperation between the two countries, particularly in terms of stabilizing business expectations. However, there are challenges to achieving this objective, such as U.S. tech restrictions and compliance costs brought about by sanctions. China believes that the common economic and trade interests shared by both nations overshadow their differences.
Foreign businesses, including those from the United States, have long expressed their concerns about the difficulties they face when operating in China. These issues include unequal treatment of foreign companies compared to their local counterparts. More recently, international businesses have lamented the vague regulations surrounding data transfer out of the country, which often hinder their operations. In response to these concerns, China’s Cyberspace Administration (CAC) introduced draft rules stating that data exports would not require government oversight if they were not deemed “important” as determined by regulators. While this move was seen as a positive step for foreign businesses, no official policy has been implemented yet. When asked for an update on data rules, Wang indicated that the primary ministry is currently working to expedite their release. Furthermore, China has made progress in supporting foreign businesses within its borders through a 24-point plan released last summer, with more than 60% of the measures implemented or in progress. Wang also mentioned that the ministry has established regular channels for foreign businesses to provide feedback.
China’s economic growth has slowed down from the double-digit rates of the past. In 2023, the country experienced a 5.2% increase in its economy. This year, growth is expected to slow even further due to increasing geopolitical tensions and other complexities. Additionally, foreign direct investment (FDI) in China declined by 8% to 1.13 trillion yuan ($160 billion) in 2023, marking the lowest level in three years. However, the Ministry of Commerce did not explicitly state the amount of investment from the United States, although it highlighted France and the U.K. as the countries with the largest FDI increases in China last year. In response to this decline, China has been actively encouraging and supporting foreign investment in the country. Chinese Premier Li Qiang, during his speech at the World Economic Forum’s annual conference in Davos, Switzerland, presented China as an opportunity rather than a risk.
The business environment in China has garnered mixed reactions. While there are CEOs who have shared stories of intellectual property infringement, abrupt changes in agreements, and biased legal decisions favoring local competitors, there are also CEOs from various sectors who have expressed enthusiasm about increased access, better business terms, licenses, and partnerships. Ian Bremmer, founder and president of the Eurasia Group, highlighted the positive experiences of CEOs from Fortune 500 companies who have business interests in China. Many of these CEOs have expressed intentions to increase their travel to China this year compared to the previous year.
Efforts are underway to create a more stable and predictable environment for businesses in China. Ongoing communications between China and the United States aim to address economic and trade cooperation while stabilizing business expectations. Nevertheless, challenges persist, such as U.S. tech restrictions and compliance costs resulting from sanctions. Foreign businesses in China continue to face obstacles like unequal treatment and vague data transfer rules. Despite these challenges, China remains an attractive investment destination. Foreign direct investment has experienced a decline, but China is actively implementing measures to encourage and support foreign businesses. The business environment in China elicits diverse perspectives, with some CEOs expressing concerns while others acknowledge positive developments and plan to increase their engagement in the country.
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