China Archives

Bit-by-Bit Won’t Get it Done on US-China BIT Negotiations

Published on September 15, 2015

by Shaun Donnelly, USCIB’s vice president for investment and financial services

When Chinese President Xi Jinping visits Washington later this month for what may well be the final full-blown U.S.-China summit of the Obama administration, there will be a lot of important bilateral and global issues on the agenda – cyber security, South China Sea, democracy and human rights, climate change, Internet freedom, North Korea, Iran, Syria and a whole lot more.  But I want to make a strong plea that the U.S. and Chinese governments also use this upcoming summit to push for real breakthroughs on the long-running U.S.-China negotiations on a bilateral Investment treaty – the “U.S.-China BIT.”

The U.S.-China BIT has the potential to be a win-win agreement to provide broad legal protections, market-opening and dispute settlement mechanisms for foreign direct investment (FDI) flows in both directions. China already has over 100 BITs with other nations, so current and potential U.S. investors are presently at a disadvantage in competing for investment opportunities in China’s fast-growing economy.  And make no mistake, this is not a one-way street; Chinese investors are already investing, and looking to invest more, in the U.S., which we should welcome to help increase investment, jobs and economic growth here at home.

Continue reading the full post on Investment Policy Central.

Business Urges U.S., China to Minimize Tech Economy Barriers

Published on August 12, 2015

Computers_loresNew York, N.Y., August 12, 2015 – The United States Council for International Business (USCIB) has joined leading American business and technology groups in urging President Obama to use his upcoming summit with Chinese President Xi Jinping to improve the bilateral relationship for the U.S. information and communications technology (ICT) sector.

In a joint letter, the groups noted that the two countries have, for nearly four decades, “consistently pursued a mutually beneficial policy of encouraging economic openness and reducing barriers to bilateral trade and investment, including in the ICT sector.” But they said the benefits of that cooperation “are now at risk, as a result of increasing and proliferating threats to national cyber-security as well as China’s approach to defining its national security interests.”

The business groups said that, since the last U.S.-China summit in November 2014, China has “increasingly pursued policies that have adversely affected the ability of U.S. ICT firms to do business in China.” They called on the two countries to reaffirm their commitments to open markets, particularly in the ICT sector.

The groups also urged the U.S. and China to ensure that measures to protect national security affecting the ICT sector are necessary, narrowly-focused and minimize disruption to open trade and competition.

The full text of the industry letter is available at https://uscib.org/uscib-content/uploads/2015/08/2015_08_11_china_ict_letter.pdf.

About USCIB:

USCIB promotes open markets, competitiveness and innovation, sustainable development and corporate responsibility, supported by international engagement and regulatory coherence. Its members include U.S.-based global companies and professional services firms from every sector of our economy, with operations in every region of the world. With a unique global network encompassing leading international business organizations, USCIB provides business views to policy makers and regulatory authorities worldwide, and works to facilitate international trade and investment. More at www.uscib.org.

Contact:
Jonathan Huneke, USCIB
+1 917.420.0039, jhuneke@uscib.org

USCIB Opposes Stringent Chemicals Regulations in China

Published on July 30, 2015

Test_tubesOn July 30, USCIB submitted comments to China’s Ministry of Environmental Protection expressing concern with draft language in China’s recently revised guidance on new chemical substances. New language suggests that any new chemical substance in an article that could potentially result in exposure to the environment or humans will be subject to full chemical notification obligations.

USCIB noted that this new requirement would be unnecessarily burdensome, imposing exorbitant costs on importers of articles. Importers would face challenges in obtaining information about the presence of chemicals in articles in order to assess potential compliance. This requirement would be imposed even if there is no corresponding benefit to the protection of human health or the environment.

“In others countries, chemical registration or new chemical notification requirements are much more limited with respect to chemicals in articles,” said Helen Medina, USCIB’s vice president for product policy and innovation. “It is not technically or economically feasible to test every article for every chemical that might be contained in each article.”

USCIB members support efforts to protect human health and the environment, and comply with a variety of national regulations including those specific to chemicals.  For this reason, USCIB is actively engaged in the Strategic Approach to International Chemicals Management (SAICM), chemicals and green economy discussions at the United Nations Environment Program (UNEP), and chemicals deliberations at the Organization for Economic Cooperation and Development (OECD) and at the Asia-Pacific Economic Cooperation (APEC) chemical dialogue.

ICC Chairman, Chinese Vice Premier Strengthen Business Ties

Published on July 30, 2015
L-R: Terry McGraw (ICC) and Chinese Vice Premier Wang Yang
L-R: Terry McGraw (ICC) and Chinese Vice Premier Wang Yang

International Chamber of Commerce (ICC) and USCIB Chairman Terry McGraw met with Chinese Vice Premier Wang Yang in Beijing on July 29 to underscore the importance of incorporating the voice of Chinese companies into global economic governance forums.

McGraw held a series of meetings with Chinese government leaders and business officials seeking to secure the engagement of Chinese companies in ICC’s work to promote cross border trade and investment.

“ICC is the world business organization and our mission is to represent the views of international business to policymakers in key forums such as the G20, the World Trade Organization, the World Customs Organization and the UN Framework Convention on Climate Change,” he said. “China has the world’s second largest GDP and is critical player in the world economy. It is therefore essential that Chinese companies are involved in ICC’s international policy-making process.”

Wang welcomed McGraw’s support and spoke positively of the indispensable role played by ICC in promoting economic growth, global trade and investment, and in strengthening global economic governance.

“We wish to step up our cooperation between Chinese companies and ICC,” said Wang. “China is willing to draw upon your suggestions and I hope ICC will play an active role in China’s reform and increasing exchanges with Chinese business to create more opportunities for foreign cooperation with Chinese companies.”

Wang said the China Chamber of International Commerce (CCOIC) – which houses ICC China – will be responsible for maintaining the close and frequent interactions with ICC.

McGraw also pointed to China’s upcoming G20 presidency, beginning on December 1, and explained that Chinese business will have an increasingly important opportunity to help shape the G20 policy agenda. McGraw shared current Business 20 (B20) priorities under development for the G20 Summit in Antalya, Turkey in November, highlighting trade, investment, infrastructure, human capital and education as priorities for G20 consideration.

“ICC has historically conveyed business priorities to G20 Leaders, and has served as a strategic partner to national B20 hosts to develop policy recommendations for G20 consideration,” said McGraw. “ICC is committed to supporting the Chinese government and the Chinese business community in its preparations for hosting the G20 and we are investing now in our long-run work plan with ICC China and CCOIC.”

Jiang Zengwei, chairman of the China Council for the Promotion of International Trade (CCPIT) joined McGraw in the meeting with Wang.

“We highly value the role of ICC,” said Jiang. “As we grow the participation of Chinese companies in CCOIC, we will work closely with ICC for support on educating Chinese businesses and incorporating their views in critical international policy forums, including trade, investment and intellectual property.”

McGraw and Jiang agreed to a long-term program, featuring a growing number of ICC meetings in China, to develop CCOIC contributions to ICC international business policy.

ICC’s delegation to Beijing also included Cherie Nursalim, vice chairman of GITI Group; Sara Dai, president of Novozymes China; Zhang Yanling, Bank of China and member of ICC Executive Board; Cindy Braddon, vice president for international affairs, McGraw Hill Financial [now S&P Global]; Jeffrey Hardy, director, ICC G20 CEO Advisory Group; and Robert Milliner, senior director, Wesfarmers and B20 Australia Sherpa.

 

 

USCIB, Members, Gov’t Reps Discuss China Engagement with U.S., OECD

Published on July 28, 2015

Blue sky and white clouds, ancient Chinese architectureOn the heels of both the U.S.-China Strategic & Economic Dialogue (S&ED) and the visit of Chinese Premier Li Keqiang to the OECD Headquarters in Paris, USCIB held an important briefing with members to discuss ongoing U.S.-China and OECD-China engagement. USCIB and members met with representatives from several U.S. government agencies, the OECD and the Electronic Industry Citizenship Coalition (EICC) on Wednesday, July 22 at Foley & Lardner LLP in Washington, D.C.

Audrey Winter from the USTR China Office, Michael Tracton from the Office of Investment in the State Department’s Economic Bureau and Zhao Li from the Department of Labor discussed outcomes of the S&ED regarding trade, ICT, investment and labor. Tracton also discussed the increasing collaboration between the OECD and China, which is exemplified by the recent agreement of Primer Li and OECD Secretary General Angel Gurría to develop an OECD-China work plan, as well as collaboration on Chinese responsible business conduct.

The second panel included the State Department’s head on conflict minerals, Eileen Kane, who reported out on her recent trip to China, where she met with several Chinese officials and agencies to gain important connections and advance the relationship with China in regard to conflict minerals. Tyler Gillard, head of sector projects and legal adviser in the responsible business conduct unit from the OECD’s Investment Division, also joined by video conference to provide an overview of the OECD’s broader outreach and capacity-building on conflict minerals with the China Chamber of Commerce. Tara Holeman, program director from EICC, discussed the Conflict-Free Sourcing Initiative (CFSI), which has been developed in line global standards including the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals and the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act.

S&ED Outcomes: Investing in China

Published on July 6, 2015

S&EDLast week, the United States and China concluded their seventh meeting of the Strategic & Economic Dialogue (S&ED) in Washington, D.C.  The annual high level dialogue, which launched in 2009 to provide a forum to discuss a wide range of bilateral, regional, and global issues between the two countries, has become an integral part of the economic relationship. The meeting resulted in a number of joint strategic and economic outcomes issued by the Departments of State and Treasury which co-lead the U.S side.  The Treasury also published a U.S.-specific fact sheet on the outcomes of the economic track.

At the dialogue, both nations reaffirmed their commitment to negotiate a high-standard Bilateral Investment Treaty (BIT) and intensify negotiations.  Even before the meetings began, the BIT was considered one of the top issues on this year’s agenda.  The 19th round of BIT negotiations concluded earlier this month in Beijing, following a period of a year and a half, during which China developed its “negative list,” a compilation of areas it would like exempted from the BIT’s market-opening rules.  Despite the apparently slow process of the negotiations, China presented its list, the first the country has ever created, at the June round in Beijing, demonstrating its commitment to the negotiations.  The U.S. experts, led by USTR and State, are now reviewing the initial Chinese list in great detail.

A major outcome of last week’s S&ED, described as one of the dialogue’s most significant outcomes by U.S. Treasury Secretary Jack Lew, was China’s commitment to provide an updated negative list reflecting a commitment to open investment environments by September of this year.  This could be a key step in the negotiation process, moving discussions forward in a manner that will allow for an appropriately market opening agreement to benefit both negotiating parties.  The Treasury Department’s fact sheet explains that U.S. officials have made clear to China that their list of exceptions will have to be ‘very limited and narrow’, as well as ‘represent substantial liberalization’.

Adequate investment protection is indispensible for U.S. investors in China, as anywhere in the world.  While a successful BIT presents an opportunity for U.S. investors to gain access to new sectors in the Chinese market, without protections and narrowly tailored exclusions, the benefits remain limited.  USCIB’s Shaun Donnelly, Vice President of Investment and Financial Services, discussed the S&ED on a segment on CNBC last week, highlighting the importance of the investment talks.

Despite being the world’s two largest economies, and the destinations for about 30 percent of global foreign direct investment (FDI), the United States and China account for a relatively small share of one another’s FDI.  In 2014, Chinese FDI in the United States exceeded American FDI in China for the first time.  Given the size and dynamic nature of the Sino-American economic relationship, the importance of finishing these the BIT negotiations with a high-standard outcome cannot be overstated; a sub-standard agreement would do more harm than good.  Progress from the most recent round of negotiations and the outcomes of the S&ED provide much needed momentum to the process and hopefully, the United States and China can capitalize on this momentum, leading to a swift conclusion of a strong agreement.

Of course, other developments – be they positive or negative – continue to be relevant to American or other foreign investors looking at China, which remains a complex and challenging place to do business.  Even as we see signs of progress on the BIT, other developments send discouraging signals – from sectoral restrictions to a new NGO law that threatens to restrict independent business organizations in China.  The U.S. business community, including USCIB, will continue to focus on investment issues in China, working to encourage the two governments to provide clear protections and real market opening for potential investors in both directions.

This blog post was originally published on the Investment Policy Central website.

 

China-OECD Cooperation Crucial for International Business

Published on July 2, 2015

The seventh joint meeting of the U.S.-China Strategic and Economic Dialogue wrapped up on June 24, concluding the highest-level bilateral forum between the two countries. The dialogue is essential for fostering a constructive relationship between the two nations, as well as for paving the way for Chinese economic reform. These bilateral economic talks are complemented by multilateral initiatives, including engagement with the Organization for Economic Cooperation and Development (OECD).

The OECD and China are expected to agree on a detailed program of work for 2015-16. This is particularly timely as China will soon unveil priorities for its 2016 G20 Presidency, and will also outline objectives early next year for its 13th Five Year Plan. China is experiencing an enduring investment downturn and deeper regional divergences.

A return to strong and sustainable growth will necessitate a firm commitment to policy reforms and their implementation. The Business and Industry Advisory Committee (BIAC) to the OECD China Task Force regularly highlights the importance of strengthening rule of law and creating a level playing field for all companies in China, whether foreign or domestic, private or state-owned.

“China and the OECD need each other now more than ever,” said Joerg Wuttke, chair of the BIAC China Task Force, commenting on the visit of Chinese Premier Li Keqiang to the OECD Headquarters in Paris. “As Chinese companies ramp-up overseas investment, and as OECD-based companies continue to sow investments in China, a new and enhanced program for China-OECD cooperation should benefit both parties,” he added.

Shaun_CNBCThe U.S. business community supports China’s reform agenda. On June 25, USCIB Vice President Shaun Donnelly talked about the U.S. business community’s perspective on the U.S.-China Strategic and Economic Dialogue in an interview with CNBC. He noted that the prospects are good for a bilateral investment treaty between the U.S. and China, and he discussed cyber security and government procurement.

USCIB has also been engaged with the OECD’s comments on China’s 13th Five Year Plan, contributing to BIAC’s submission on the plan last year. USCIB’s China Committee will meed to discuss OECD-China relations in late July.

The OECD, a world-leader in policy tools, analysis, and advice on economic governance, is well placed to advise China on its reform agenda. OECD instruments, such as the Guidelines for Multinational Enterprises and the Anti-Bribery Convention, will be especially useful for Chinese companies investing overseas that face both the complexities and expectations of global markets.

“Sustaining China’s growth is in the interest of all parties,” commented Wuttke. “Recognizing the enormous potential for reform, the BIAC China Task Force looks forward to contributing to this next phase of China-OECD cooperation.”

In CNBC Interview, USCIB’s Donnelly Assesses Prospects for U.S.-China Investment Treaty

Published on June 24, 2015

Shaun_CNBCIn an interview on CNBC, USCIB Vice President Shaun Donnelly talked about the U.S. business community’s perspective on the U.S.-China Strategic and Economic Dialogue taking place this week. He noted that U.S. business is looking forward to a bilateral investment treaty between both countries, and he discussed cyber security and government procurement.

Watch the interview.

USCIB Comments on U.S.-China Investment Relationship

Published on May 6, 2015

Blue sky and white clouds, ancient Chinese architectureUSCIB submitted recommendations on behalf of the American business community to the U.S.-China Joint Commission on Commerce and Trade (JCCT), the primary forum for addressing bilateral trade and investment issues and promoting commercial opportunities between the United States and China.

USCIB supports efforts to improve the business environment for both U.S. and Chinese companies. In a statement submitted on April 30, USCIB urged both governments to move ahead on a high-standard U.S.-China Bilateral Investment Treaty and made the case for using the full range of multilateral forums available to work toward improved commercial relations.

The recommendations highlighted specific member concerns that can be efficiently addressed through high-level dialogue afforded by the JCCT process. These concerns included:

  • Anti-monopoly law (AML)
  • Audiovisual
  • Certification, Licensing and Testing Barriers
  • Express Delivery Services (EDS)
  • Government Procurement
  • Intellectual Property Rights
  • Regulatory Environment
  • Standards
  • State-Owned Enterprises
  • Technology Policy

“USCIB appreciates the commitment to ongoing dialogue the United States and China have made in the JCCT process over the years and encourage continued commitments to focus efforts on improving the business environment for both U.S. and Chinese companies,” the report noted.

Read USCIB’s recommendations.

Business Urges China to Halt Controversial Cyber Banking Regulations

Published on April 15, 2015

Computers_loresUSCIB joined a coalition of 31 trade associations from around the world urging the Chinese Communist Party to end banking regulations that require foreign technology companies to give source code and encryption keys to Beijing officials. The global business community has argued that the China Banking and Regulatory Commission guidelines discriminate against foreign providers of information and communications technologies (ICTs) and would effectively shut foreign firms out of  China’s banking sector.

In a letter sent to the Chinese Communist Party on April 13, USCIB and 30 other trade associations called on Chinese leaders to suspend the cyber banking guidelines and open up to stakeholder input.

“Sovereign interest in a secure and development-friendly cyber economy is best served, in any country, by policies that encourage competition and customer choice, both of which necessitate openness to non-indigenous technologies, as well as an ongoing dialogue between industry and government,” wrote USCIB and other associations in the letter. “Approaches that keep out certain technologies would likely render China’s affected industries slower to innovate, more costly to operate, and less capable of managing dynamic security threats leaving Chinese networks less secure.”

Officials from the U.S., the European Union and Japan have criticized the banking rules. U.S. officials say China is using cyber security as an excuse for protectionism.

UPDATE: China issued written notification on April 16, 2015 that it had temporarily suspended implementation of these regulations.