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China will be an equal play field for foreign companies



Chinese Premier Li Keqiang Addresses a Press Conference November 28, 2017.

Attila Kisbenedek | AFP | Getty Images

DALIAN – Chinese Premier Li Keqiang on Tuesday promised a congregation of global business leaders and government representatives that Beijing will push to create an equal playground in the country for all companies.

As American and Chinese dealers begin a renewed pressure on a trade deal, the rhetoric seemed to meet many of the American complaints about unfair treatment for foreign-based firms. Nevertheless, the extent to which China's leadership will act on its promises of economic freedoms remains the key issue.

"We must now allow state-owned enterprises, privately owned and foreign-invested companies, as long as they are registered in China, to be recognized as Chinese companies, all treated equally," Li said in his address at the World Economic Forum in Dalian, China. .

Li gave the example of how China's plans for nearly three billion yuan ($ 300 billion) in taxes and tax cuts this year should apply to all three categories of businesses, according to a CNBC translation of his mandarin-language comments.

American and other foreign companies have long regretted that the Chinese government is giving preferential treatment to home-grown businesses, especially state-owned conglomerates. Despite demands for "reform and opening up" over the last four decades, Beijing has often demanded foreign companies to form joint ventures with Chinese entities ̵

1; and apparently forced them to share valuable technology – to operate in the country. China's privately-run businesses, which contribute to the majority of jobs and growth in China, have also complained of different access to finance compared to state-owned enterprises.

Li did not comment or respond directly to a US and China trading issue on Tuesday.

His remarks came at the heels of US President Donald Trump's and China's President Xi Jinpons' deal this weekend to continue trading negotiations. Negotiations had made a scam in early May, but at the sidelines of the G20 meeting in Osaka, Japan, the two leaders said they would continue to look for a way forward.

"Business wants a productive relationship with China," said Charles Freeman, senior vice president of Asia in the US Chamber of Commerce, in a telephone interview with CNBC on Monday. "We believe that (a) good commercial conditions are crucial to the health of the relationship. Overall, (on Saturday's temporary ceasefire), it's a bit emotional, it's a little lack of detail. But we like the tenor."

Trade tensions between the world's two largest economies have been for more than a year. Both countries have added billions of dollars to goods from the other. The US has also put tech firm Huawei on a blacklist that effectively prevents US companies from selling to the Chinese telecommunications giant. Trump said Saturday that he would consider allowing sales to the company, saying that the US would keep tariffs on Chinese goods.

In his comments on Tuesday, Li launched a list of ways he claimed that China is opening or planning to open its economy for more foreign participation. These included:

  • Raising restrictions on foreign ownership of securities, futures and life insurance companies by 2020, one year earlier than previously planned.
  • Opening of the production sector to major foreign investments, including facilitating foreign equity restrictions in the automotive industry.
  • Gradually reduced the industries that are limited for foreign investment.

During his Tuesday address, the Chinese leader did not highlight economic challenges as much as he needed to reach a domestic audience during the annual National People's Congress meeting in March. In front of the World Economic Forum, Li argued that the country is on track to reach its 6% to 6.5% target in this year's economic growth. It will still fall below last year's 6.6% rate, which itself was the slowest growth since 1990.

On the economic front, Li said China would not engage in competitive devaluation of its currency or flood the economy with extreme stimulus despite for pressure on growth. Both of these potential measures had been worried about markets and would have indicated significant fears of a financial slide among Beijing makers.


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