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China National People’s Congress: Promises of fair competition

Every year in March, around 3,000 delegates meet at the National People’s Congress in Beijing to discuss the situation in China and to pass budgets and laws. Against the backdrop of the smouldering trade conflict, China’s foreign investment policy came under international observation this year.

At the end of the 11-day session, the People’s Congress approved a new foreign investment law designed to protect the rights and interests of foreign investors. It provides for an end to forced technology transfer, and for equal treatment of foreign investment. An official explanation of the law specified that the state must “protect copyrights” and ensure that foreign companies are not “disadvantaged”.

Both of these issues have drawn repeated criticism internationally. In the current trade conflict, for example, the US government accuses China of the intellectual theft of American technology.

Criticism of investment law

Abroad, the new law has generally been welcomed. Experts see it as a signal that Beijing wants to open its market further. However, there has also been criticism. The American Chamber of Commerce in China claims the law doesn’t go going far enough. In an official statement, it criticised the changes as relating to only a small part of the unequal competitive conditions for foreign companies in China. The Chamber of Commerce also criticised the vague language used in the legislation. For example, the Chinese government is allowed to expropriate investments that “harm the public interest”.

The President of the European Chamber of Commerce in Shanghai, Carlo Diego D’Andrea, said the law was a step in the right direction. However, even with the new law, legal differences between Chinese and foreign companies remain.

China lowers growth forecast

The National People’s Congress has also adopted stronger economic stimulus measures to bring its weakening economic growth under control. China has lowered its GDP growth target to 6.0 from 6.5 percent. This is the lowest it has been in 30 years.

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The measures include tax cuts worth CN¥2 trillion (almost $300 billion). Private companies will be supported by lower taxes: The VAT rate for manufacturers will be reduced from 16 to 13 percent, and tax levied on transportation and construction from 10 to 9 percent.

Despite the economic slowdown, China plans to continue spending heavily on the military. The national defence budget has been increased by 7.5 percent from the previous year. Already in 2018, expenditures rose by 8.1 percent. Against the background of growing tensions in the South China Sea, both China’s neighbours and the US are watching Chinese military expansion with concern. Premier Li Keqiang justified the increased spending as necessary for the protection of the country’s sovereignty, security, and “development interests”.

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