Beijing Promotes Economic Openness but With Mixed Signals – MERICS

by: Jessica Ferreira

China is once again campaigning to attract foreign investment, while giving mixed signals by limiting suppliers in key areas, according to MERICS.

Last week, Premier Li Qiang gave a speech during the China Development Forum designed to appeal to global investors, highlighting the country’s economic policy reforms, urban development, industrial development and the transition of companies towards sustainability.

The prime minister’s speech followed the publication of a 24-point plan by the State Council – the second in just seven months – to help foreign companies and to introduce an easing of cross-border data transfer rules by the Cybersecurity Administration of China (CAC).

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However, according to the report by Mercator Institute for China Studies, these business-friendly measures were marginal and the intended positive message was nullified by Beijing’s replacement of Intel and AMD chips and Microsoft Windows in government computers, revealing the state’s eagerness to replace foreign technology with domestic alternatives, as it focuses on national security and economic self-sufficiency.

Beijing seems to be sending mixed signals that it is both open to reforms to attract foreign investment and focused on national security over economic liberalization. This is one of the reasons why the government’s first 24-point plan from August 2023 has not changed the downward trajectory of foreign investment flows – and why the new measures are unlikely to be any more successful, according to MERICS.

Foreign investors still need to be persuaded that China is worth their long-term commitment. This will require resolving the challenges identified by European companies in China, as well as a thorough structural reform of the economic model in order to make more resources available to consumers.

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On the other hand, compelled to listen to companies’ concerns in a context where foreign investment is the lowest it has been in decades, Chinese regulators have significantly relaxed the rules on the transfer of data abroad with regard to the export of non-sensitive and personal information, following pressure from European industry and EU officials.

Companies had expressed frustration with the vague definitions and the low level of requirement for carrying out security analyses, which disrupted their activity. Enterprises can now export the personal data of up to one million people without a mandatory assessment, while exports required for normal business operations are exempt.

In addition, information collected in the context of international trade, transport, academic cooperation, manufacturing and marketing can now leave the country without any prior authorization, provided it does not contain personal or important data.

 

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