Illustration: Xia Qing/GT

The world has been closely watching the latest round of high-level trade negotiations between the US and China, which took place in Beijing on Thursday and Friday, for clues as to whether a trade resolution will be reached before the March 1 deadline. 

With the slowdown seen in the economies of both countries and the world in general, the US and China have a sober understanding of the importance of reaching a trade deal, which is reflected by the increasing flexibility shown by both parties. Last week, US President Donald Trump even suggested that he could extend the deadline if both parties are making good progress and are nearing a formal agreement.

As the US and China both have the need to reach a deal, it is generally expected that both parties will make some compromises to avoid an escalation of trade disputes. In this situation, China will most likely significantly increase its imports from the US in the short term, while at the same time making substantial changes with regards to issues like market opening and technology transfer.

At present, there is much speculation about what compromises China may make or which industries the nation will open to more foreign investment. Last year, against the background of the unprecedented trade war, the National Development and Reform Commission, China's top economic planner, published a new version of the negative list for foreign investment. The negative list, which took effect on July 28, removed foreign ownership limits for special vehicles and new energy vehicle manufacturing, with the ownership cap for passenger car manufacturing scheduled to be lifted by 2022. Moreover, the latest list also eased or scrapped foreign investment curbs on sectors like banking, insurance, ship and aircraft manufacturing, and power grids.

Nevertheless, it should be made clear that despite the external pressures, it is actually a need for China's economic development, at the current stage, to further open up markets. Thus, the country's accelerated opening-up is not only the response to the external risks, but also a key step in transforming pressures into new growth momentum.

So far, the openness of China's manufacturing sector is relatively high, especially compared to the degree of openness in the service industry, with foreign ownership limits and license restrictions set in such sectors like medical care, education, express delivery and others. Since the overall manufacturing sector is now basically opening up, there is a high possibility that China will expand the opening of the service industry in the near future. Specifically, finance, medical care, education and elderly care are all potential sectors that could see greater market access, as the current Chinese society is also in need of these services. In other words, China has already got the basic conditions for further opening up of its service industry. With the country's per capita GDP exceeding $9,000, the proportion of residents' basic living consumption has declined, while the consumption demand for information, culture, medical care, education, elderly care, entertainment and other services has increased.

Some observers, however, have been concerned about the impact of increased opening-up on the domestic services industry. It is undeniable that such an impact is inevitable, but it should be viewed as the pressure to stimulate the innovation and competitiveness of domestic industries. Widened market access and lowered entry thresholds don't necessarily mean foreign investment will be subject to no, or even relaxed rules and regulations. Like in other developed markets, a proper review and supervision will still be in place to monitor the development of the relevant industries.

For instance, in the US, while there is no such limit on foreign equity ownership, the government can still conduct a review of major foreign transactions and investments in such industries as power generation, telecommunications, shipping, banking and media through the Committee on Foreign Investment in the United States (CFIUS), in the name of national security.

Of course, China will be unlikely to set up such a review body like the CFIUS, but in the context of its accelerated opening-up, it is making its own preparations.

In January, a draft foreign investment law was submitted to the Standing Committee of the National People's Congress, China's legislature, for its second review. The fast-tracked review not only reflects China's eagerness to make legislative preparation for the increased opening-up, but also indicates its strong determination to open further up to the world and to level the 'playing fields' for foreign and domestic companies.


The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn