China and the U.S. Working Towards a Stable Business Environment
China’s Commerce Minister, Wang Wentao, announced on Friday that China and the U.S. are collaborating to create a more stable and predictable environment for businesses. This comes after U.S. Commerce Secretary Gina Raimondo’s visit to China last summer, where the two countries agreed to hold regular meetings at various levels. Wang and Raimondo recently had a call to further discuss their efforts.
Wang emphasized that the communication between China and the U.S. aims to establish a favorable environment for economic and trade cooperation, particularly in stabilizing business expectations. He did not explicitly mention the U.S. tech restrictions but acknowledged that sanctions bring uncertainty to businesses and significantly increase compliance costs.
In the past two years, the Biden administration has implemented export controls that restrict Chinese companies’ access to advanced technologies like high-end semiconductors from U.S. businesses. Washington justifies this move as a means to prevent China’s military from acquiring cutting-edge technology while still maintaining areas of cooperation.
Wang expressed his belief that the common interests of China and the U.S. in the economy and trade outweigh their differences, emphasizing the importance of collaboration between the two countries.
Growing Challenges for International Businesses in China
Foreign businesses, including those from the U.S., have long faced challenges when operating in China. Unequal treatment compared to local companies and vague rules regarding data transfer out of the country have made operations difficult.
In an attempt to address these concerns, the Cyberspace Administration of China (CAC) recently issued draft rules stating that data exports do not require government oversight unless regulators deem them “important.” While this move was seen as an improvement for foreign businesses, no official policy has been implemented yet.
When asked about the progress of data rules, Wang stated that the primary ministry is working diligently to release them. He also highlighted that China has taken steps to support foreign businesses, with over 60% of the measures outlined in a 24-point plan implemented or making progress. The ministry has also established channels for foreign businesses to provide feedback.
During Raimondo’s visit to China, she called for more action to improve predictability for U.S. businesses. She specifically mentioned that addressing any of the points in the 24-point plan would demonstrate a commitment to taking action.
The Complex International Trade Situation
China’s economic growth has slowed in recent years, with a 5.2% increase in 2023. The country expects further slowing this year, and Wang warned that the international trade situation would become even more complex and severe due to factors like increased geopolitical tensions.
According to data from the Ministry of Commerce, foreign direct investment in China decreased by 8% to 1.13 trillion yuan (0 billion) in 2023, the lowest level in three years. The data did not specify the amount of U.S. investment in China but noted that France and the U.K. saw the largest increases in foreign direct investment last year.
China has been actively seeking to attract more foreign investment. At the World Economic Forum’s annual conference in Davos, Chinese Premier Li Qiang presented China as an opportunity rather than a risk. Many CEOs from various sectors expressed their enthusiasm about increased access and new business terms, licenses, and partnerships in China.
Despite the challenges and slower economic growth, China’s position as the world’s second-largest economy with significant industrial infrastructure and a massive consumer base still makes it an attractive market for international businesses.
