BusinessDay

China eases foreign ownership curbs as trade war looms

China has cut the number of industrial sectors closed to foreign investment as Beijing tries to appeal to international businesses ahead of a looming trade war with the US.

The National Development and Reform Commission, China’s top economic planning body, on Thursday eased or scrapped foreign ownership limits on surveying and mapping, some mining, shipbuilding and aircraft manufacture, power grids and some crop science.

The NDRC’s shortened “negative list” — which identifies sectors off-limits to foreign investors — includes previously announced commitments to remove ownership caps in certain financial services sectors by 2021, and on vehicle manufacture by 2022.

China has also issued several announcements liberalising the financial services sector — a reform that had been promised for many years but shelved as the Chinese economy came under stress from 2012-2016.

With the economy now more stable, Chinese leaders are eager to attract new capital flows. However, the revised negative list still retains many limits on industries that China views as sensitive or strategic.

Foreign investment in cloud computing is restricted, oil and gas is still limited to partnerships with Chinese companies, and foreign companies are banned from rare earth mining — a strategic sector — and tobacco.

The announcement follows US president Donald Trump’s decision earlier this week to roll back plans to restrict Chinese investment in the country. The US has squared off for months against China, seeking both a lower trade deficit and better investment terms for foreign business, but real trade flows have not yet been affected.

In an extensive list of US demands presented to China in early May, Trump administration officials led by Treasury secretary Steven Mnuchin urged authorities to issue a shorter negative list by July 1.

China has also renewed a push to negotiate an investment agreement with Europe, which had in the past taken a back seat to negotiations with the US. A Sino-European summit earlier this week concluded with an agreement to accelerate negotiations over the negative list.

The revised negative list, effective from July 28, “helps with wooing Europeans in particular, since they have been pushing a lot on this issue”, said Tu Xinquan, a trade expert at the University of International Business and Economics in Beijing. “It won’t matter much to Trump because he doesn’t want US companies to invest abroad.”

The US-China Business Council called the timing of the release “coincidental” to Mr Trump’s softened stance on restricting Chinese investment into the US as China had flagged its intention to narrow the negative list for several months.  ​