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2019-07-01 | All chapters

Negative List Reductions Are Welcome, But Regulatory Reforms Are Crucial

The revisions to China’s negative lists announced on 30th June 2019, are a small but welcome additional step in China’s ongoing opening up process. The removal/raising of equity caps for foreign investment in selected areas of the Chinese economy has the potential to bring new opportunities for some European companies to enter the market or expand their footprint. However, for this opening to be meaningful, other deeper systemic and administrative reforms are needed.

In the recently released European Business in China Business Confidence Survey 2019, 15 per cent of European Chamber members report that they continue to face direct market access barriers, which include the market access negative list and the negative list for foreign investment. By comparison, 30 per cent of members indicated that they face indirect market access barriers, such as complex administrative approval processes and difficulties accessing operating licences.

Such barriers carry heavy costs for those affected, with a third of European Chamber members impacted saying that resulting lost opportunities amounted to 10 to 25 per cent of their annual revenue in 2018, and 13 per cent saying they amounted to more than a quarter of annual revenue.

“With these latest, piecemeal revisions to the negative lists, China has again ostensibly opened the door to new areas of its economy,” said Jörg Wuttke, president of the European Union Chamber of Commerce in China. “We now need to see major, complementary reforms to China’s regulatory environment that match the ambition of those made twenty years ago during its WTO accession. This could help to ensure that persistent issues, such as ambiguous rules, conflicting regulations, unequal treatment of foreign companies and favouritism of SOEs, are consigned to the scrap heap.”

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Yichi Zhang