From 8 to 11 April 2018, the Annual Conference of the Boao Forum for Asia was being held in name-giving Boao, a town in southern China´s island province of Hainan. The conference, which labels itself as a Asian Davos, is themed “An Open and Innovative Asia for a World of Greater Prosperity”, where Chinese President Xi Jinping delivered a keynote speech at the opening ceremony in front of international guests including international head of states like Austrian chancellor Sebastian Kurz, Dutch Premier Mark Rutte, Philippine President Duterte, Pakistan Premier Abbasi, Singapore Prime Minister Lee Hsien Loong or representatives of international organizations like the Managing Director of the International Monetary Fund (IMF) Christine Lagarde and UN Secretary-General António Guterres.
Ecovis Beijing sums up some of the most important announcements of this event.
TRADE, TARIFFS, AND IMPORTS
One of the main topics was the future of trade. With a potential trade dispute with the US in mind, Xi said that China wants to increase its imports of products which are competitive and in demand by the Chinese people. The increase of imports requires the lowering of import tariffs, which will be implemented this year for automobiles and other products.
Xi stressed, that China does not intend to threaten anyone or create spheres of influence. On the other hand, he hopes that “developed countries will stop imposing restrictions on normal and reasonable trade of high-tech products and relax export controls on such trade with China.”
China wants to strengthen the protection of intellectual property rights (IPR) for foreign enterprises as well as Chinese enterprises. According to Xi, only a strong IPR protection provides the biggest boost to enhancing the competitiveness of the Chinese economy. “We encourage normal technological exchanges and cooperation between Chinese and foreign enterprises and protect the lawful IPR owned by foreign enterprises in China.” But in return China also wants foreign governments to improve protection of Chinese IPR.
OPENING UP AND BETTER MARKET ACCESS
This year marks the 40th Anniversary of the start China’s Reform and Open Up policy. Xi noted that without that landmark policy China’s growth rates in the last 40 years would not have been possible.
He vowed to further open up the country for foreign countries and improve the environment for foreign investors and has specific sectors in mind: “China will accelerate the opening-up of the insurance industry, ease restrictions on the establishment of foreign financial institutions in China and expand their business scope, and open up more areas of cooperation between Chinese and foreign financial markets. In manufacturing, China has basically opened the sector with a small number of exceptions, such as automobiles, ships, and aircraft, according to Xi. These industries are now able to grow. Going forward, we will reduce limits on foreign investment in these industries as soon as possible.”
Specifically, measures will be taken to raise or abolish foreign equity caps in the banking, securities and insurance industries.
BELT AND ROAD INITIATIVE
The Belt and Road Initiative is partially seen as an attempt by China to construct a massive, multinational zone of economic and political influence that has Beijing at its center. While the project is initiated by China, Xi claims that the opportunities and outcomes will benefit the world: “China has no geopolitical motives, seeks no exclusionary blocs and imposes no business deals on others.” The BRI is supposed to become the broadest platform for international cooperation in keeping with the trend of economic globalization and the greater benefit of all the peoples,” Xi said.
ADVICE FROM OUR ECOVIS BEIJING FDI ADVISORS
It is not the first time the Chinese government vows to further open up to foreign countries. The speech of Xi Jinping mainly echoed similar points as Liu He´s speech in Davos earlier this year. It is unclear, whether China will keep these promises considering the uncertainties foreigners in China experienced in recent years (for instance the Cybersecurity Law or the restrictions regarding co-working spaces). Although a better IPR protection has been made, it is more likely because of the importance of the Chinese industrial manufacturing sector and its Strategy “Made in China 2025”.
But the main driver of the speech was probably the wish to calm tensions regarding the trade dispute with the USA. Instead of attacking Trump or the US, Xi was talking more about cooperating and the lowering of import tariffs for instance for cars (even though the new list for punitive tariffs against the USA also include cars from the US ). This speech will not have a direct market effect, but it could help lower the temperature of the looming “trade war”. (For more information, read our article on what you can do and expect in case of a trade war)
If you have further questions on the effect of the tariffs on your China business, feel free to contact firstname.lastname@example.org.
With contribution by Tjun Long Mok
Richard Hoffmann is a partner at ECOVIS Beijing China. Richard obtained an honors degree in law and worked in Germany, the United States, and China for various prestigious law firms prior to joining ECOVIS. In addition to being a member of the board of ECOVIS International, he is Supervisor for the China business of a respected German company and shares his extensive knowledge to students by teaching commercial law in China at SRH Hochschule Heidelberg. He has published more than fifty articles in international magazines, frequently speaks at high profile events in China and abroad and is often invited as a legal expert by international TV stations. Contact: email@example.com.
Ecovis Beijing is the trusted tax and legal advisor to several embassies and official institutions in China. It specializes in mid-sized international companies and is focused on tax & legal advisory, accounting and auditing. If you’re interested in finding out more about tax and legal, don’t hesitate to sign up for our Newsletter, give us a call +86 10-65616609 or contact us directly via firstname.lastname@example.org.