China eases investment curbs as clash with US looms

BEIJING - Associated Press

China has eased limits on foreign ownership in auto manufacturing, insurance and other fields but didn’t directly address complaints that are fueling conflict with Washington over trade and technology.

The investment changes, announced late Thursday, had been sought by Washington, Germany and other trading partners. They complain Beijing blocks access to much of its state-dominated economy while Chinese companies operate freely in other countries.

China’s announcement followed U.S. President Donald Trump’s threat, rescinded on Wednesday, to restrict Chinese investment in the United States. But it reflected official confirmation of promises made as early as last November, before the latest dispute erupted.

Many of the changes "were previously articulated by China’s senior leaders," said Jake Parker, vice president for China operations of the U.S.-China Business Council, an industry group. "But they still represent in theory significant openings that we have been calling for for a long time."

There were no changes that directly address U.S. complaints Beijing steals or pressures foreign companies to hand over technology.

Trump has threatened to impose tariffs of up to 25 percent on as much as $450 billion of Chinese goods. Beijing says it will retaliate, prompting fears the dispute could chill global trade and economic growth.

The dispute has allowed Beijing to position itself as a defender of global free trade, though it is the most-closed major economy.

Restrictions on foreign ownership in finance, transportation, professional services and manufacturing of autos, ships and aircraft will end under the changes announced by the Cabinet’s planning agency. The government left in place a ban on foreign ownership in publishing, internet news services, film and TV and restrictions on oil and gas exploration and telecoms.

Companies need to see licensing requirements before they know how freely they will be allowed to operate, Parker said.

"That process will ultimately determine how significant these openings are," he said.
Business groups have complained China’s market-opening steps often are followed by licensing or other restrictions that make operations difficult or unprofitable.

The announcement marks the second time Beijing has issued a "negative list" that states which industries are off-limits to foreign investment while leaving the rest of the economy open.

That change, first implemented last June, overturned a system that told foreign companies where they could invest. Companies said that failed to keep pace with economic changes and blocked them from emerging market segments.

The biggest surprise appears to be a commitment to end limits on foreign ownership in China’s insurance industry by 2021, two years earlier than a deputy finance minister had promised in November.

The plan retains a step-by-step increase in ownership limits, first to 51 percent and then 100 percent. Business groups have warned that might increase costs for foreign companies by giving Chinese partners leverage to demand higher prices for their stakes.

The government also said it would lift caps on foreign ownership in construction for power grids and railways, passenger train transportation, commercial logistics, surveying and mapping companies, seed breeding, maintenance of ships and aircraft and smelting of rare earth metals.