A European business group yesterday said that China is running out of time to keep slowing economic growth on track and needs to speed up market-opening reforms promised in a two-year-old development plan.
In some areas, the Chinese Communist Party is moving backward on reform pledges by reducing market access for foreign and private companies, the EU Chamber of Commerce in China said in a report. It pointed to proposed laws that would limit the use of foreign security and computer technology.
Growth in the world’s second-biggest economy fell to a two-decade low of 7.4 percent last year. It is forecast to fall further as the ruling party tries to shift to sustainable expansion based on domestic consumption and service industries instead of trade and investment.
“The current slowdown could evolve into a soft landing if China manages to rebalance its economy,” the chamber report said.
However, with an aging population, the report said, “its window of opportunity to successfully roll out the structural reforms needed to do so is rapidly closing.”
The chamber termed current conditions “reform and closing up” — a play on the party’s long-time description of its economic plans as “reform and opening up.”
The report echoes a similar appeal last month by the American Chamber of Commerce in China for Beijing to move faster on opening banking, insurance and other service industries to private and foreign competitors.
The group said that could help China improve its volatile financial markets and cope with disasters such as the deadly chemical explosion in the Chinese port of Tianjin.
Beijing has made some changes such as in April repealing a rule that limited foreign investors to owning only a minority stake in online commerce businesses. However, it has yet to make significant changes to reduce the dominance of politically favored state-owned enterprises (SOEs).
“Basically, we still see market forces being impaired by the strengthening or even the expansion of SOEs,” chamber president Joerg Wuttke said in an interview ahead of the report’s release.
The chamber urged the Chinese leadership to speed up reforms aimed at making bank lending and other financial business more market-oriented. It called for an end to China’s system of catalogs that tell foreign companies in which industries they can invest.
Instead, it urged Beijing to carry out its repeated promises to switch to a “negative list” that would put some areas off limits for national security or other reasons and leave the rest of the economy open.
The chamber warned that recent legal changes could close wide swathes of the economy to foreign and private business. It pointed to a sweeping, vaguely worded National Security Law, proposed restrictions on use by banks of foreign security products, a law tightening control over nongovernmental organizations and proposed cybersecurity and anti-terrorism laws.
“Yes, China needs a national security law,” Wuttke said. “But the wording is so opaque and vague that a lot of mergers and acquisitions by foreign businesses in china could be impossible.”
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