Foreign Investors Face Tighter Controls In China

Oct. 9, 2006
China is looking to product domestic markets.

China's open-door investment policy, the hallmark of the country's remarkable economic transformation, is being squeezed by a protectionist push that may make it tougher for foreigners to do business, analysts said. Over the past few months China's ruling Communist Party has made it clear that after nearly 30 years of unparalleled growth, it wants to overhaul its economic model to better protect the nation's interests.

"The Hu-Wen administration has tried to adjust the economic development strategy," said Li Cheng, a China scholar at the Brookings Institute in Washington. "It is seeking more domestic demand, less foreign trade, more social justice, less economic growth, more inland development, less favorable policies for its coastal regions."

Beijing has justified the measures by citing the need to restructure its booming economy but also to lend a hand to domestic industries that are being outclassed by foreign competition. Officials blame foreign corporations for unfair competition practices and because they command dominant positions through mergers, brand management and abundant capital, more must be done to protect local players.

The apparent shift also underscores the tenuous legal environment for foreign investors in China even though the country is still opening up its industries as mandated by its membership in the World Trade Organization. "As long as China doesn't have real rule of law, foreign -- as well as Chinese -- business people there will have to rely on the good will of the powerful to protect their interests," said Andrew Nathan, a China expert at Columbia University in New York.

Copyright Agence France-Presse,

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