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US Companies Await Reforms from China's New Leadership

Sept. 23, 2013
U.S. businesses' top concerns in China are the increasing cost of doing business, the corruption and intellectual property rights.

WASHINGTON – U.S. companies in China are taking a cautious view of the new Chinese leadership, hoping a key November Communist Party meeting will clear up the outlook for economic reform.

Representatives of the American Chamber of Commerce in China (AmCham Shanghai), visiting Washington last week, said that Chinese President Xi Jinping had indicated plans to further open up the economy. But it was unclear whether he had all the control levers at his command less than a year after taking power, they said.

Xi, who became head of the Communist Party last November, has shown he will take "a more pro-market approach than his predecessor (Hu Jintao)," Kenneth Jarrett, president of AmCham Shanghai, told reporters.

But businesses were waiting to see what comes out of a key meeting of the Chinese Communist Party leadership in November.

The meeting -- known as the third plenum -- traditionally is used to unveil political and economic reforms. The plenum could be an "opening salvo" on Chinese reforms, Jarrett said.

The AmCham Shanghai delegation was in the U.S. capital for their annual "doorknock" talks with top Obama administration officials, lawmakers, and members of leading think tanks, pushing for a stronger U.S.-China economic and trade relationship.

Jarrett said that China has only provided "sketchy" details on the planned free-trade zone in Shanghai announced in early September.

The FTZ could be a "pilot project" for financial and economic reforms, he said. Timothy Stratford, a member of the delegation, said the Shanghai FTZ could be used to test a lowering of barriers to U.S. investment in China.

The relaunch of U.S.-China negotiations on a Bilateral Investment Treaty in July was an encouraging sign, the executives said. The Chamber estimates that a successful conclusion of the BIT could open more than 100 Chinese industries to U.S. investment.

And the benefit would be shared, fostering badly needed U.S. job growth as the economy recovers from the Great Recession.

China already is the fastest-growing source of foreign direct investment into the United States, up at an annual average rate of 71% from 2008-2012, according to the U.S. government.

China Warming to Trans-Pacific Partnership

The BIT could even pave the way for China to join the U.S.-led initiative to create an Asia-Pacific free-trade area, the business leaders said.

China's new leadership appeared to have made a remarkable U-turn on the Trans-Pacific Partnership, said Stratford, a managing partner of law firm Covington and Burling and a former assistant US Trade Representative.

Just four months ago, he said, Chinese officials called the U.S.-led TPP initiative "insidious containment."

"Now we're hearing far more positive words," he said.

Robert Theleen, chairman of AmCham Shanghai, said that China's income surge of more than 20 percent a year was more important than the country's gross domestic product growth, which has slowed modestly from a blistering pace a few years ago.

The robust Chinese income growth "is tied more and more to urbanization," said Theleen, chairman and chief executive of ChinaVest, a Shanghai-based merchant bank he founded in 1982.

There are 170 cities with populations of 100 million or more, he noted.

And U.S. businesses are pursuing "in-China, for-China" strategies, he said, producing locally and plowing back renminbi investment into the world's second-largest economy.

U.S. businesses' top concern is the increasing cost of doing business in China, according to AmCham Shanghai's annual survey of members, which include 1,800 corporations and 4,000 individuals.

Chinese government corruption is the number-two concern, followed by worries about intellectual property rights.

Peter Sykes, president of Asia Pacific for Dow Chemical, said his company employs more than 500 scientists and researchers in China, the firm's second-largest international market.The creation of intellectual property there "balances the ledger," he said.

During their three-day mission, AmCham Shanghai struck agreements with the Commerce Department's International Trade Administration and the Congress-funded US Trade and Development Agency to promote US business opportunities in China.

And despite the U.S. political gridlock over the government budget and debt ceiling, as well as deep sequestration spending cuts, the delegation said it was pressing for increased funding of the U.S. Trade Representative's office and other agencies.

-Veronica Smith, AFP

Copyright Agence France-Presse, 2013

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