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Trade war

Pressure on China must not be relaxed, American businesses say

Chamber group expects more forced tech transfers despite pledge by Beijing

The U.S. is skeptical about Beijing's pledge to forbid forced tech transfers from foreign firms and its willingness to let go of plans to seize the lead in high-tech sectors.   © AP

HONG KONG -- China must do more to live up to its pledges to give more opportunities and better treatment to foreign companies, a leading U.S. business group in the country has warned.

The warning from the American Chamber of Commerce in China in its annual White Paper policy report comes as fears intensify in the international business community that the settlement being negotiated in the ongoing U.S.-China trade war will fail to address fundamental reforms of Chinese policies that favor local companies.

These underlying issues must be addressed if "healthy, balanced and mutually beneficial economic relations" are to be sustained between the two countries, wrote Timothy Stratford, chairman of AmCham China.

"At present, the gap between [Chinese] policy as stated and as enforced remains significant," said the former assistant U.S. Trade Representative now managing the Beijing office of American law company Covington & Burling. "Previous bilateral dialogues and other mechanisms have not generated the results that are needed."

While individual companies have long been reluctant to speak out about unfair treatment in China out of fear of official retribution, voices in the business community have quietly expressed worries in recent days that the emerging U.S.-China trade deal will be tilted more toward Chinese purchasing pledges to address the trade deficit between the countries.

"The U.S. business community in China, so long an advocate of good bilateral relations, can no longer be relied upon to be a positive anchor," begins the new White Paper. It traces this to "extensive market access barriers, protectionism, an opaque regulatory system and discriminatory enforcement, among other practices that have created an uneven playing field for U.S. companies operating in China."

The chamber report expresses doubts about Beijing's pledge, embodied in a new Foreign Investment Law adopted last month, to forbid forced transfers of technology from foreign companies and its willingness to let go of its Made in China 2025 plan to seize leadership in several high-tech sectors.

Referring to the investment law, the White Paper says, "Foreign companies are now focused on the development of implementing regulations and how China will choose -- or not -- to guarantee equal treatment of foreign and domestic investment and IP protection." It adds, "Foreign companies can expect continued pressure to share technology and to partner with domestic firms if they are to enjoy access to the Chinese market, especially in key sectors outlined in the MIC 2025 initiative."

"Even though MIC 2025 may have ended, baseline support for the policy appears to be ongoing with less transparency, which is problematic," the report says. "AmCham China members remain concerned that previous MIC 2025 policies will continue to be used to support domestic companies at the expense of" foreign-invested enterprises.

The AmCham report favorably notes pledges by Beijing over the past year to lift limits on foreign investment in certain areas, but warns more is needed to make the openings fair and effective.

AmCham said the authorities should "remove market access barriers that, in practice, make it more difficult for U.S. securities companies to benefit from market opening measures," namely a promise to allow 51% stakes. It said a proposed requirement that majority shareholders in such companies have net assets of at least 100 billion yuan ($14.9 billion) is "extremely high" and"creates a new obstacle to U.S. financial firms."

"AmCham China strongly urges the establishment of a truly level playing field for foreign investors operating in China," it said. "Implementing equal treatment means eliminating rules that unintentionally limit market access."

Ultimately, the chamber argues Washington must pursue reciprocity. "If Chinese businesses can make an investment in the U.S., American companies should be able to make the same investment in China subject to the same terms and conditions," it said.

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