China calls on foreign businesses to share their problems as investment slumps

• China’s Ministry of Commerce met with foreign businesses this week in an effort to address operating challenges, but did not share much progress on major issues.
• “What came up was concerns about changes to national security regulation that impacts the ability of companies to conduct due diligence in China,” said Jens Eskelund, president of the EU Chamber of Commerce in China.
• The roundtable on Wednesday came as U.S.-China exchanges have ticked up — and both sides attempt to stabilize the tense relationship between the world’s two largest economic powers.

The flags of China, U.S. and the Chinese Communist Party are displayed in a flag stall at the Yiwu Wholesale Market in Yiwu, Zhejiang province, China, May 10, 2019.

BEIJING — China’s Ministry of Commerce met with foreign businesses in Beijing this week in an effort to address operating challenges, but did not reveal much change on major issues.

The roundtable on Wednesday came as U.S.-China exchanges have ticked up — and both sides attempt to stabilize the tense relationship between the world’s two largest economic powers.

While the Commerce Ministry meeting did not reveal much new progress on the 24 measures to support foreign business that were announced last summer, attendees said they were able to share specific challenges about doing business in China.

“The impression that most of us were left with was there’s a genuine desire by MofCom to deliver on these measures,” Jens Eskelund, president of the EU Chamber of Commerce in China, said in an interview, noting the ministry asked businesses to share “concrete examples.”

“I think authorities were actually encouraging openness, and I think a number of participants were fairly direct in the comments they provided,” he said.

However, the meeting did not provide clarity on when proposed changes to data export rules would take effect, Eskelund said. Forced technology transfers and a new law about state secrets did not come up in the meeting either, he said, noting that perceived discrimination in public procurement remains an issue.

In the fall, the Cyberspace Administration of China released draft rules that signaled a softer stance by saying no government oversight is needed for data exports if regulators haven’t stipulated that it qualifies as “important.” No final version has yet been revealed.

China this week also announced an updated law on state secrets would take effect May 1, emphasizing the country’s growing emphasis on ensuring national security.

“What came up was concerns about changes to national security regulation that impacts the ability of companies to conduct due diligence in China,” Eskelund said, noting the Commerce Ministry’s response was to share specific instances as they occurred, including any unfair treatment versus domestic companies.

China’s Ministry of Commerce confirmed in a regular press conference Thursday that, as disclosed about a month ago, at least 60% of the 24 measures have been implemented or seen progress, and that it would keep working on it. The ministry said representatives from more than 60 foreign businesses and 9 associations attended Wednesday’s roundtable.

“One issue that we raised at the meeting with MofCom was an overemphasis on finding investment from new companies,” said Michael Hart, president of the American Chamber of Commerce in China, who attended Wednesday’s roundtable.

“This drive most often comes from local officials, since they are typically measured on their ability to attract FDI,” he said.

Foreign direct investment into China has fallen to its lowest level in three years, according to official data, amid geopolitical tensions and slowing growth in the country.

Hart said that it’s hard for companies not yet in China to complete due diligence and approve new investments.

“We would encourage the government to instead focus on solving the issues of companies who are already here, many of whom have had a presence in China for decades,” he said, noting those businesses are in a better position to make additional investments, potentially boosting the attractiveness to new companies.

More U.S.-China meetings and visits

U.S.-China tensions have eased since U.S. President Joe Biden and Chinese President Xi Jinping met in San Francisco in November. Biden, who faces re-election this fall, has emphasized the need to compete with China while finding areas of cooperation.

The U.S. Transportation Department this week said that Chinese passenger airlines can add 15 more round-trip flights to the U.S. each week, starting March 31, Reuters said, noting that is only about one-third of pre-pandemic levels.

Official and non-official visits between the two countries have ticked up in recent months, including a week-long trip to China in January by students from a U.S. high school.

Chinese Premier Li Qiang met Wednesday morning with Suzanne P. Clark, president and CEO of the U.S. Chamber of Commerce, according to a readout on China’s Ministry of Foreign Affairs.

“China will open its door even wider to the outside world, continue to foster a world-class business environment that is market-oriented, law-based, and internationalized, and provide more support and convenience for U.S. companies and firms from other countries to invest and do business in China,” the readout said, describing Li’s comments.

The Foreign Ministry late Thursday also said the two countries “held a new round of foreign policy consultation” in which “the two sides had candid, in-depth and constructive communication on respective foreign policies, international situation and regional hotspot issues.”

Salman Ahmed, director of the U.S. secretary of State’s policy planning staff, and Miao Deyu, assistant foreign minister and director-general of the department of policy planning of the Ministry of Foreign Affairs of China, met in Shanghai on Tuesday, the Chinese side said.

The U.S. Chamber of Commerce and U.S. Department of State did not immediately respond to requests for comment.

China next week kicks off its annual parliamentary meetings to discuss economic and other policy.