MNI INTERVIEW: China Must Keep Reforming To Lure Big Business

China has been left more reliant on large global businesses for direct foreign investment as strict Covid rules have alienated small and medium-sized firms, with prospective investors keen for Beijing to provide greater access and policy clarity, British Chamber of Commerce China managing director Steven Lynch told MNI.

The advocacy group is calling on the government to provide more clarity on long-standing issues that have dogged British companies operating in China, including market access and intellectual property protection, after the 20th Party Congress proposed a greater opening up of domestic markets. (See MNI POLICY: Fiscal, Credit Support To Drive China Growth Plans)

“The Party Congress indicated more international openness but was light on specific policy” said Lynch in an interview with MNI, adding he was awaiting further detail from the National People's Congress in March.

“China changed laws recently to improve the treatment of foreign firms, such as allowing foreigners to enter more markets, but Covid disruptions have made it hard to see the impact filter through on the ground.”

Years of pandemic-related disruption meant a loss of engagement across business, politics and culture spheres, which Lynch believes has repercussions for the long term. “The positive momentum built up over decades has vanished, with leaders losing connection, meaning less trust and understanding”, he said.

He cited more interest from the Ministry of Commerce (MOFCOM) in understanding foreign business issues as evidence Beijing is serious about attracting foreign companies, adding “we are getting better senior engagement than before”.

But firms are still concerned by Beijing's increasing emphasis on national security and defence of Covid-Zero, a sign ideology may be taking precedence over pragmatism, he said.

SMEs HIT HARD

According to Lynch, small and medium sized enterprises have been hardest hit under Beijing’s covid stance, with many leaving the country and others unwilling to enter as losses mounted and patience waned.

"SMEs haven't had the financial and human resources to deal with Zero-Covid in the way that bigger players did. Many are deciding that China is just too much trouble" he said.

“Beijing will rely more on established larger firms for FDI and market participation post-Covid” he said, adding that MNCs have a strong understanding and experience in the country, which gives them a longer-term perspective that things will improve.

“China’s huge market potential means the large MNCs are prepared to dig in and go the distance” he said.