China Will Treat Domestic and Foreign Companies Equally Starting in 2018: PBOC

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One of the Chinese central bank’s senior-most officials has indicated that the country will implement a nation-wide foreign investment negative list starting from 2018, which they claim will make for equal treatment of domestic and foreign companies when it comes to market access.

Addresing the Second National Development Forum (第二届国家发展论坛) held by Peking University in Beijing over the weekend, Yi Gang (易纲), vice-head of the People’s Bank of China, said that following the implementation of trials of negative lists in the free trade zones of Fujian, Guangdong, Shanghai and Tianjin over the past two years, China would officially launch a nation-wide market entry negative list system in 2018.

Political leaders already made reference to the implementation of a unified market entry system at the Chinese Communist Party’s 19th National Congress in October, which will permit various market players to “lawfully and equally enter those sectors outside of the negative list.”

The implementation of the negative list will mean two key changes in Yi Gang’s opinion, the first being “breaking through various types of irrational restrictions and hidden barriers, and handing the remaining decision-making rights of the market to the market.”

“In the past, we engaged in differentiated treatment based on the different ownership systems of enterprises and different regional origins,” said Yi Gang.

“The negative list means a shift to equal treatment – irrespective of whether it’s a state-owned enterprise or private enterprise, domestic capital or foreign investment, or a small or large enterprise, all will enjoy equal rights and equal regulations, and enjoy commensurate conditions for market entry.”

The other change will involve a shift from emphasis on the examination and approval process to strengthening of supervision and regulation following market entry.

According to Yi the strengthening of supervision and regulation following market entry means using dynamic, full-procedure risk monitoring and regulation to ensure that markets are “full of  vitality, as well as standardised and orderly,” which will be of “especial benefit to the development of non-government companies.”

China first began to conduct trials of the negative list system in the four free trade zones of Fujian, Guangdong, Shanghai and Tianjin in 2015. The following year they collectively attracted 80 billion yuan in foreign investment, for a year-on-year increase of 81%.

The foreign invested-enterprise negative list of the free trade zones has been reduced to 95 items this year, from 190 in 2013.

According to Yi Gang the negative list serves to clearly define the professional duties where government can play a better role, and will be of benefit to government focusing more on strategic research and the formulation of plans and standards.

“The duty of government is to maintain a sound market order, provide good public services, and provide public infrastructure…[it] must expedite employment, and provide better schools, communication, transportation, social order and environmental protection,” said Yi.

Yi said that there are still problems with China’s trial negative list systems, and that they have failed to meet targets in relation to standardised opening, public transparency, and fairness of market entry standards.

According to Yi the chief problem is a low level of transparency, an excess number of regulatory authorities, high entry standards and complex entry procedures.

 

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