China Economic Reform Scorecard - October 2014

USCBC is rolling out a Reform Scorecard on a quarterly basis to assess the actual impact of China’s reforms on foreign company concerns. The scorecard is divided into categories based on key themes for reform, such as the role of the state and the market, foreign investment, institutional reform, and others. The report assesses the impact of reform policies, both individually and as a whole.  In this second assessment, China’s economic reform policies to date have had a limited impact on American company operations.

Since China’s new leadership came to power in early 2013, senior government officials and agencies have spoken widely about economic reform. The November 2013 Chinese Communist Party (CCP) Third Plenum – its annual meeting of China’s top political leadership – marked a key inflection point, as statements from senior officials and post-plenum documents that clarified the direction of reform. Focal points in these reform plans included letting the market plan a “decisive role” in the economy, fostering rule of law, opening more areas to foreign and private investment, and changing how state-owned enterprise (SOE) are owned and operated.
 
While China’s top-line reform message of “letting the market play a decisive role” remains compelling, the implementation has lagged. The slow speed of reform continues to create uncertainty about when – and even whether – policy changes will address the market access and level playing field concerns of USCBC members.

Highlights:

  • USCBC’s latest assessment of China’s economic reform efforts shows a limited impact on American company operations, with no discernable change from USCBC’s June 2014 assessment.

  • China’s top-line reform message of “letting the market play a decisive role” remains compelling, but the slow speed of reform continues to create uncertainty about whether policy changes will address the market access and level playing field concerns of USCBC members.

  • While some new reform-related policies have been released since June, such as revisions to the Shanghai Free Trade Zone (Shanghai FTZ) foreign investment restrictions list and proposed changes to allow greater labor mobility, the policy specifics do little to address core issues of concern to foreign companies.

  • This version of the Scorecard is being released in advance of the annual conclave of China’s top political leadership in Beijing from October 20-23, which provides a next opportunity for policy pronouncements and actions that could tangibly advance economic reforms.

  • USCBC will continue to update this Reform Scorecard regularly to assess new policy developments and their impact on USCBC member company operations in China. Key areas that could signal progress include concrete policies to reduce investment barriers, boost the role of the market in the economy, create a level playing field for foreign and domestic firms, and promote rule of law, greater transparency, and independent regulators.