BEIJING (Reuters) – Recent strains in the relationship between the United States and China make it especially important to establish a policy of ‘competitive neutrality’ the American Chamber of Commerce in China said on Thursday.
FILE PHOTO: Chinese and U.S. flags flutter near The Bund, before U.S. trade delegation meet their Chinese counterparts for talks in Shanghai, China July 30, 2019. REUTERS/Aly Song
The chamber, long considered a steadying hand in a relationship fraught with geopolitical tension, has advocated a harder line on China’s trade practices and investment policies over the past few years.
Progress was made earlier this year towards resolving a bitter trade dispute with an initial deal and the rollback of some tariffs, but a blame game on how the COVID-19 pandemic has been handled has raised tension again.
In a near 500-page long annual white paper, the Chamber, also known as AmCham, listed hurdles to what it described as a truly level playing field that could restore trust and stop a downward spiral in bilateral relations.
President Donald Trump has long railed at China for not allowing U.S. companies the same access as Chinese companies get in the United States; the chamber said questions were also being raised internationally about the issue.
“Enacting a policy of ‘competitive neutrality’ is especially important given the increasing scrutiny facing the US-China commercial relationship,” the AmCham said.
Beijing has repeatedly said it treats foreign and domestic firms equally and welcomes foreign investment.
The chamber said long-standing structural issues underlining a lack of transparency in China’s economic system remained unresolved.
“U.S. companies continue to face an uncertain operating environment in China,” said the AmCham, which found in a February survey that nearly a third of U.S. companies had seen revenues slashed as the coronavirus outbreak disrupted activity.
While a new foreign investment law and other measures were encouraging, it said, opaque regulatory processes, the favoring of domestic champions under a state-led development model, and weakness in intellectual property protection continued to hamper the operations of U.S. businesses.
It also expressed concern about the general nature of many of the provisions of the foreign investment law, saying implementation could be sketchy.
“Unfortunately, previous bilateral dialogues and other mechanisms have not generated the results that are needed to sustain healthy, balanced, and mutually beneficial economic relations,” said Greg Gilligan, the chairman of AmCham China.
COMMUNIST PARTY CELLS
In a sign of Beijing’s greater control, over 50% of U.S. companies surveyed for the new white paper said they had been required to establish Communist Party cells. However, the survey showed only 7% reported a negative impact from having done so, with 5% saying they had benefited from the measure.
The white paper detailed operational challenges encountered by sectors ranging from auto to finance alongside a list of recommendations for Chinese policymakers. Over 80 percent of the companies surveyed cited market access restrictions, particularly in the consumer and technology sectors.
For example, some foreign companies still met hurdles during business license application procedures despite moves by China to lift equity caps and lift joint venture restrictions.
Chinese regulatory authorities should recognize distinctive characteristics of foreign bank operations and apply differential regulatory procedures accordingly, the chamber said.
It urged greater inclusion of foreign financial institutions in the onshore fixed income market, approval for financial firms’ foreign entities to serve as Bond Connect market makers, and expanded access to hedging and derivatives tools for onshore A-share markets.
Reporting by Yawen Chen and Ryan Woo; additional Reporting by Yew Lun Tian, Luoyan Liu and Yiming Shen; editing by Philippa Fletcher