Open and shut case for cutting China’s red tape
IMF reiterates its call for Beijing to produce a ‘level playing field’ for overseas companies and thaw out Cold War-style trade tensions
Opening up appears so hard to do in China. For the second time in three months, the International Monetary Fund has called on the world’s second-largest economy to push through plans to “ensure a level playing field” for overseas companies.
By rolling out a concrete timetable, President Xi Jinping’s administration would help thaw out Cold War-style trade tensions between Beijing and Washington, the IMF pointed out.
“We are looking at China and comparing it with other G20 countries … in terms of service trade and investment, the Chinese economy is still very restrictive,” Alfred Schipke, the chief China representative for the IMF, said at a symposium in Beijing.
His comments came after an annual report in May by the Washington-based institution recommended that reforms be accelerated to further open up the economy through modernizing the country’s policy framework.
“Promise fatigue” has set in among China’s key trading partners, such as the United States and the European Union, fueling concerns that Beijing is stalling.
This, in turn, has resulted in the country being cited for restrictive practices at the World Trade Organization in Geneva and in part for the tit-for-tat tariffs conflict with the US.
“To be an effective and credible leader of better globalization, China should continue to address the distortions that still beset its economy and affect cross-border trade and investment,” David Lipton, the first deputy managing director at the IMF, said in May.
“China would benefit from exposing sheltered sectors and firms to more domestic and foreign competition, ensuring a level playing field, and better protecting intellectual property rights,” he added.
Beijing has stressed it is pressing ahead with moves to cut red tape, address intellectual property rights violations, which have improved in the past two years, and end restrictive practices in certain sectors.
But more needs to be done, according to a research group at the China Institute for Reform and Development in Hainan.
As Xi’s government realigns the economy from lower level factory production to high-tech manufacturing in new industries and services, as well as rising consumer demand, finding the right balance will be crucial.
“China should pay greater attention to protect intellectual property rights of entrepreneurs and individuals,” the group said in an opinion piece for the state-owned China Daily earlier this month.
“[The country] should also deepen supply-side structural reform in the service sector and further open [it] up to attract more capital and improve the supply of services. The authorities should break down administrative and market monopolies and open it up all-round,” they added.
Signs of cooling
In reality, this has proved excruciatingly slow with the economy showing signs of cooling.
Last month, European Commission President Jean-Claude Juncker reiterated that Beijing had to show more urgency in fulfilling promises it had already made during the past few years.
Protectionist policies are still widely in place with Washington and Brussels demanding greater access during a review of China’s WTO membership in July.
“If China wishes to open up it can do so,” Juncker said at a news conference in the Great Hall of the People following the annual summit between China and the EU in Beijing. “It knows how to open up.”
The big question, of course, is when will that happen?