Chen Wenling: China Will Move Towards Higher Level of Institutional Opening-up

A speech delivered by CCIEE Chief Economist, Chen Wenling

After China’s accession to the WTO, it abolished three major policy barriers for foreign companies and revised 2,000 laws, regulations and government orders that do not comply with WTO rules. Furthermore, it also eliminated more than 200,000 local laws and regulations to adapt itself to the international market. China’s opening to the outside world is also the process of restructuring China’s institutions and legal system, which has begun a long time ago.

However, the laws and drafts issued in March last year and this November are of special significance. From the beginning of the reform and opening up to China’s entry into the WTO, we have always tried to explore the establishment of rules/institution-based opening-up. As can be seen clearly, China is moving towards a higher level of opening up. The “Foreign Investment Law” will bring significant institutional guarantee to foreign companies, more details can be described as follows.

First, the “Foreign Investment Law” will further improve China’s modern business environment. According to the World Bank, the ranking of China’s business environment has been improved from 78th to 42th since 2017. This year, China ranked 31st. China has made rapid progress in improving its modern business environment. For example, the free trade zone has been expanded to 18 areas. The free trade zone manages foreign capital in accordance with the negative list, which was reduced from 196 items in 2015 to the current 40. The “Foreign Investment Law” aims to restrict non-national treatment and stop discriminatory policies, and ensure that foreign investors enjoy national treatment in China.

Second, the “Foreign Investment Law” will make foreign-invested enterprises to feel “three senses” and “one comfort” in China. First of all, a sense of security. Foreign enterprises in China will have the same sense of security as they do in their own countries. Secondly,a sense of achievement. According to a survey conducted by the US-China Business Council on 900 foreign companies, 97% of them are making profits in China, 88% of them plan to invest in China in the long term, and 46% of them have achieved an average profit in China that is higher than their global average. This kind sense of achievement is very important for foreign companies. The third sense is the sense of existence, which means foreign-invested enterprises are not discriminated in China. The ultimate goal is to improve the “comfort” of foreign companies in China. Of course, Chinese companies also need the same “comfort”. The management system of all enterprises needs to be reformed according to the principle of national treatment.

Third, the “Implementation Regulations on Foreign Investment Law” answered questions that are of common concern to foreign investment. Many important legal provisions have been added to this law, such as intellectual property rights protection, participation in the formulation of standards, and free remittance of foreign exchange. In the future, all the foreign-funded enterprises will have no barriers to enter China’s financial market, which are particularly important policy arrangements. China will fully open its door to allow foreign-funded enterprises to compete fairly. The business environment will become better and better and China will never shut down the door of opening-up.

Fourth, China will make a contribution to an open world. At present, some countries are protectionists and choose to close its door to the outside world. According to Rhodium Group, Chinese investment in the United States in 2016 was 45.6 billion dollars, but dropped to 29 billion in 2017 and 5 billion in 2018. This year, this figure may be less than 5 billion because the United States has imposed restrictions on foreign investment. Some countries are closing doors but China keeps its door wide open. I think that foreign businessmen are more optimistic about the Chinese market. China has a population of 400 million middle-class, which means it has the largest and most promising market in the world. The Import Expo will also be held in Shanghai soon. All these policies show that China is moving in the direction of openness, making great efforts to create a first-class business environment.

Fifth, China still has many problems that need to be solved. The enactment of laws is to highlight the major issues of concern to foreign investors from a problem-oriented perspective, and to protect foreign investors.

Zhou Bing, vice president of Dell Greater China, said yesterday that the key is implementation. He is right. I think that the following three things need to be implemented.

First of all, the “Implementation Regulations on the Foreign Investment Law” should be further divided into management processes, management systems, and management methods. In other words, the implementation of the “Foreign Investment Law” will force the governmental departments to innovate their management system, mechanism, and management method. The government management must comply with the law, not the opposite. This is particularly important.

Second, for the laws and regulations that do not comply with the “Foreign Investment Law” and the “Implementation Regulations on Foreign Investment Law”, we should either revise or abolish them, just like what we did when entering the WTO. By doing so, the new law will play a better role.

Last but not least, foreign-invested enterprises in China, especially those who are sitting here today, must strengthen their confidence in the Chinese government and its determination to open up China. China will conduct further reform and will not shut itself to the outside world. The investment environment in the Chinese market will be better and China will grow together with foreign-invested enterprises.

Thank you all!