Tag Archives: Reform and Opening

No turning back on foreign investment policy change

Much as Chinese regulators and Citigroup might prefer to sweep the past week’s events under the rug, there is no avoiding the sense that a Rubicon has been crossed in China’s relations with foreign investors. Months from now, analysts will likely look back and circle an inflection point on their charts while academics will be engaged in endless debates over how far Chinese policy on the use of capital has shifted. It might take a bit longer for historians, but they will surely soon start drafting treatises about the moment Xi Jinping redefined Socialism With Chinese Characteristics.

Neither the Party leadership nor the foreign investment community are likely to come off well in accounts of this time. Both have looked past each other, failed to grasp contrasting viewpoints, misunderstood meanings, and misread intentions.

A more cynical view might say that they have not; that this is the way the money dance is done. They understand each other, but engage in public theatrics to secure and press their relative advantages.

Regardless, what happened is worth examining at face value.

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CSRC to ‘fully support’ Shenzhen’s capital markets

The head of the country’s stock market regulatory agency says Shenzhen’s capital markets will continue to pursue reforms that aim to completely open it to the international investment community. Step by step. As soon as possible.

Observers who have been champing at the bit to see further opening of China’s capital market may be forgiven a yawn. At first glance, this sounds like the usual reassurances from a regulator that reforms are proceeding ASAP, when the reality is different. But Yi Huiman (above, left), head of the China Securities Regulatory Commission, was speaking to local media during an inspection tour of Shenzhen earlier this week. It was his first visit following the city’s designation as a Pioneering Zone for Socialism with Chinese Characteristics, and he was in the company of Shenzhen’s leader, Party Secretary Wang Weizhong (above, right), who is also Deputy Party Secretary of Guangdong.

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Hong Kong gets reform agenda rolling

American scholar Andrew Nathan has an interesting piece in Foreign Affairs summarizing what “insiders” say is Beijing’s approach to the crisis in Hong Kong. Though the presentation of this analysis fits too neatly into a US-centric worldview, it helps explain why the Hong Kong government is moving quickly to address the city’s dire shortage of housing: Because the central government believes the protests are being driven primarily by intolerable socio-economic conditions. Fix those, and the rest will take care of itself.

The logic has appeal. While Nathan’s sources are almost certainly wrong to suggest that the country’s senior leadership isn’t worried about addressing the political dimension of the protests, it makes sense to train attention and resources on fixing first what can be fixed easiest. Any capable government would be taking this approach.

This doesn’t necessarily mean that Beijing misunderstands where the protesters’ rage is coming from. The country’s leadership probably knows all too well that the crisis is not going to be fixed with bread alone. But it also likely understands that without a commitment to deep socio-economic reform, no other grievances can be addressed in a sustainable way. Fixing the land issue is about much more than bringing down the cost of living. It’s about changing the way people live.

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Beijing taps Shenzhen, again

The ninth meeting of the Central Committee for Comprehensively Deepening Reform (CCCDR) was held on Wednesday. Established as part of the massive party-state restructuring launched in March 2018, Trivium China calls it “the most important policymaking body in the land.” That’s right, more important than even the Politburo Standing Committee.

The meeting has approved 11 documents, most of which you would need a Western-Chinese political dictionary to understand. The one that stood out for us was No. 10: “Supporting Shenzhen to become a pilot demonstration area for socialism with Chinese characteristics.”

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Wider, deeper opening pledged

Here comes the point again that we keep harping on about: While the U.S. is stuck on insisting that its economic reform demands be met before it will consider lifting its tariffs on Chinese goods, China is busy getting on with the business of Reform and Opening, Act II.

The National Development and Reform Commission announced today in Beijing that the country will remove all access restrictions on foreign investment in areas outside the “negative list” by the end of this year. The reason they are doing this, according to China Daily, is because it is part of the country’s overall effort to further open up the economy and pursue high-quality development (emphasis added).

“China welcomes foreign businesses to invest and develop in China. And we will continue to unswervingly expand opening up, create a more open and business-friendly environment and protect the legitimate rights and interests of foreign investment,” Meng Wei, spokeswoman for the NDRC, said.

That is not all. “Our negative lists will only be shortened further,” she added. “By the end of this year, China will lift all barriers to foreign investment not included on the negative list. And China will encourage more foreign investment in more fields, especially for the central and western regions.”

A negative list indicates areas where investment is prohibited, while all other areas are presumed to be open. The reality, however, is that many other areas have had a slew of other restrictions in place that effectively shut out foreign competition, and it is these areas where the barriers are coming down.

What does this mean for investors in the GBA? Perhaps rhetorical questions work best. Where do you suppose high-quality development is going to be pursued most vigorously? In the western and central regions, far from an integrated supply chain and the world’s busiest financial markets and ports? Or right here?

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