Foreign Market Expansion Leads to Economic Boost in China
Recently, China has made marvelous efforts in getting foreign businesses to function more easily in local markets within China. This past month, the country decided to remove foreign ownership limits by implementing a new foreign investment law. The new policy takes effect on Jan. 1, and it prohibits the forced transfer of technology from foreign-invested businesses in China, increases protection of intellectual property (IP), and provides companies equal opportunities with domestic businesses. Although this new policy will have difficulty appeasing the U.S., it will provide more benefits for China’s economy in terms of global expansion.
China’s implementation of this new foreign investment law has promising outcomes, such as giving ownership of technology and greater IP protection for foreign-invested businesses, but another factor that needs to be considered is how much of the Chinease market will foreign businesses have access to, especially since the Chinese market has reduced its exposure to the world over the past 10 years. Regardless of the situation, it is undeniable that the entrance of foreign financial institutions could potentially aid China in getting more access to global markets.
One significant way that China has been proving its willingness to expand to foreign markets is through their policy’s focus on better IP protection, which has been a notorious issue for foreign businesses. Additionally, removing trade secrets during internal document exchanges provides another huge step forward, especially because many believe that China wields its state-controlled legal system to take whatever trade secrets for its own companies. Even if the country pointed to statistics showing that it respected the rights of international firms, the United States and the European Union (EU) have expressed extreme doubt toward their claim. The US and EU believe that China’s system can force companies to give up their technological or trade secrets if they want to do any business in the country, which does not even account for claims of outright intellectual property theft, which is prevalent in China. To lessen tensions between the domestic and foreign-invested businesses, China is now trying to address these issues and actually make changes. Thus, some say that this new investment law is China’s biggest attempt to open its market to outsiders since the 1980s, which was when the country allowed foreign investment.
Finally, another attempt China has made to demonstrate their seriousness was through the China Securities Regulatory Commission. They announced that, starting in 2020, foreign businesses could take full ownership of future companies of mutual fund management companies and securities companies. These were major strides in providing more exposure and access for foreign entities. Given that the Asian market is currently the world’s second-largest economy, outside businesses are viewing this opportunity in China in a positive light.
References:
Chengevelyn. (2019, October 29). EU Chamber says China's new foreign investment law is
'surprisingly accommodating'. Retrieved from https://www.cnbc.com/2019/10/21/
eu-chamber- chinas-foreign-investment-law-is-surprisingly-accommodating.html.
Chengevelyn. (2019, October 30). China's moves to boost foreign business also help Chinese
companies. Retrieved from https://www.cnbc.com/2019/10/29/chinas-moves-to-boost-
foreign- business-also-helps-chinese-companies.html.
Olsen, K. (2018, October 4). China respects others' trade secrets - unless it wants something,
experts say. Retrieved from https://www.cnbc.com/2018/10/04/trade-secret-protection-
remains-a-challenge-in-china-even-experts.html.
Edited by: Belicia Rodriguez, Urvi Agrawal
