China Politics and YOUR Business

With all that is going on with China’s economy, its trade discussions with the United States, the US tariffs, and the EU’s mounting frustration with China, our China lawyers are finding themselves more often engaged in “big picture” discussions with our clients than ever before. We are constantly getting hit with questions like the following:

1. What are you seeing in China?
2. Where do you see things going in China?
3. What’s going to happen with the tariffs?
4. Will China ever open up?
5. Are China’s new foreign investment and IP laws going to change things?

We are well-trained and well-positioned to answer some of these, such as the one regarding China’s new laws and we write about those. See China’s New Foreign Investment Law and Forced Technology Transfer: Same As it Ever Was and China Approves New Foreign Investment Law to Level Playing Field for Foreign Companies. MEH. 

But when it comes to something like how the winds are blowing with the Chinese government and how those winds will impact foreign companies that do business in China or with China, we read the experts who truly focus on these big picture political-economic issues. I mention all this because I was today sent a report from one of our largest Spain clients, entitled China’s 2019 Two Sessions: What It Means for Your Business. Our client had read the report, found it helpful, and thought we too would benefit from it, and we have.

Now before I talk about that article and explain why you should go read it yourself, I am going to indulge in a relatively quick diversion. Yesterday, my law firm had its bi-weekly “international team” meeting. We have one meeting a month at 9:00 a.m. PST so as to make life easier for our lawyers in Spain (a5 p.m. there) and the other meeting at 5 p.m. PST so as to make life easier for our lawyers in China (at 8:00 a.m. there). One of the things I love discussing at these meetings is what I call the 360 degree nature of our practice and in our meeting yesterday I talked of how the EU lead at a multinational company had contacted us because he had heard of our having opened a Madrid office and he was based right outside Madrid. I just assumed from this that he was seeking Spain legal help, but it turned out he wanted to work with our Spain lawyers on a China matter. Hardly a week goes by where we don’t get an email in Spanish or German or French (languages multiple attorneys at our firm speak fluently and are on our website) seeking legal help in Asia, the United States, or elsewhere in Europe. It’s a small world after all.

But I digress. Back to the main point of this post which is the article on China’s Two Sessions — the “approximately 10 days of meetings that gather China’s top legislative body, the National People’s Congress (NPC), and its top advisory committee, the Chinese People’s Political Consultative Conference (CPPCC).” Caroline Meinhardt of APCO Worldwide headed up the writing of this report. I do not know Ms. Meinhardt, but I know a number of APCO people and I know APCO to be a top worldwide consultancy company, especially well regarded for its China political knowledge and acumen. The Special Report is 20 pages, but Ms. Minehardt nicely summarizes it on APCO’s blog here. The blog posts lists out the following five “key takeaways” and my comments in italics immediately follow each.

1. This year’s Two Sessions was decidedly low-key amid turbulent trade and diplomatic ties with the rest of the world. Nevertheless, it remains the most comprehensive annual review of priorities set by China’s leadership, which include measures to address economic and social challenges. This is my understanding as well. 

2. Stability is the government’s top priority amid the continuation of China’s economic slowdown. 2019 will see the implementation of major tax cuts, job creation measures and expanded financial support for private enterprise. I have always believed China’s government views stability/harmony as Job #1 and nothing has changed. 

3. Beijing made a concerted effort to reassure foreign investors of a level playing field in response to widespread international pushback against market restrictions. The passing of the Foreign Investment Law is a positive step, but its success hinges on the government’s ability and willingness to enact the law through concrete measures. I completely agree that the proof will be in the pudding, but I am pretty confident there will either be no pudding or it will be so thin and watery as to hardly matter. 

4. Despite the end of Made in China 2025 as a policy term, China is still pushing forward its industrial upgrading agenda under a different guise. High-end technological development remains at the heart of China’s development strategy and will likely continue to cause disputes with the foreign business community and major trading partners. I 100% agree. Just because China changes a term or two does not mean its underlying desires have all of a sudden shifted. 

5. One year on, the dust has settled on China’s government restructuring. Foreign multinationals can expect more clarity in their regulatory landscape this year and should grasp every opportunity to engage their government stakeholders early on as policy agendas are being formulated under new ministry leadership. China tightening up its regulatory landscape has been ongoing for more than a decade and I see this only continuing.

For more specifics, I strongly urge everyone to read the full report. I assure you it will be worth it.

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