The requirements of "stabilizing foreign trade and stabilizing foreign investment" put forward at the meeting of the Political Bureau of the CPC Central Committee on July 31 will have a significant effect on the economic trend in the second half of the year.

The meeting pointed out that the current economic operation is stable and changing, facing some new problems and challenges, and the external environment has undergone obvious changes. It is necessary to grasp the main contradiction and adopt highly targeted measures to resolve it.

At present, the signals sent by the United States on the Sino-US trade relationship are complex and changeable. In response to the US side's plan to raise the tax rate on China's $200 billion exports to the United States, a spokesman for China's Ministry of Commerce issued a statement on August 2, saying: "The United States has made two moves in the past two days, on the one hand, it has issued a statement to raise the tax rate on China's $200 billion exports to the United States from 10% to 25%, and on the other hand, it is spreading wind everywhere and resuming negotiations with China." China has always believed that bad things can be turned into good things and challenges can be turned into opportunities, and we are full of confidence in achieving the goal of high-quality economic development. ”

Similar to past months, behind the tariff rate battle is the deep game between China and the United States in the global value chain, including investment and bans. Deng Xiwei, an associate professor at the School of International Relations at Johns Hopkins University, told the first financial reporter that the United States intends to raise tariffs on imports from China of such a scale, which will not only cause a direct impact on the operation of relevant enterprises, but more importantly, it will bring deep worries: that is, some foreign-funded enterprises subject to taxation may choose to transfer and withdraw to other countries.

Just one day before the Politburo meeting, the Ministry of Commerce issued a decision to relax the rules for foreign strategic investment in listed companies, and shorten the time limit for share transfer to one year. This opening-up policy, which some people in the field of foreign investment call "quite significant", aims to promote a new round of high-level opening up, introduce overseas capital and management experience, improve the governance structure of listed companies, standardize the strategic investment behavior of foreign investors in A-share listed companies, maintain the order of the securities market, and protect the legitimate rights and interests of listed companies and shareholders.

A veteran in the field of Sino-US trade negotiations told the first financial reporter that to stabilize foreign trade, it is necessary to mobilize the enthusiasm of all kinds of enterprises to export, help them cope with the challenges brought by the Sino-US trade war, and be anxious about what enterprises are anxious about and think about what enterprises think. Encourage enterprises to explore export markets outside the United States, make up for losses within the dike, and diversify the export market.

Tariffs are not the trickiest factor

Since the last face-to-face economic and trade consultation in early June ended without results, negotiations between China and the United States have stopped, but at this time, the United States once again released the news that it will tax goods imported from China, what is the impact, and how should it respond? By all indications, tariffs do not seem to be the most tricky external environmental variable.

A spokesman for China's Ministry of Commerce pointed out on the 2nd that the United States not only ignores the interests of the world, but also disregards the interests of ordinary farmers, entrepreneurs and consumers in the United States, and plays a two-handed strategy of both soft and hard against China, which will not have any effect on China and disappoints countries and regions in the world that oppose trade wars.

The spokesman also said that China is fully prepared for the threat of escalating the trade war by the United States and will have to make countermeasures to defend national dignity and people's interests, defend free trade and the multilateral system, and defend the common interests of all countries in the world. At the same time, China has always advocated resolving differences through dialogue, but only if we treat each other as equals and keep our promises.

Yi Bo, an associate professor at Southeast University Law School who participated in the on-site hearing of the US 301 investigation twice, told First Financial Reporter that in addition to the support of 6 enterprises at the scene, 82 representatives present expressed their opposition. In the latest (July 24~25) 301 investigation hearing, more than 90% of the more than 300 written comments released by the US side expressed opposition.

Sun Lei, a partner at Beijing Dacheng Law Firm, who just went to Washington to participate in the "232 investigation" hearing and defended on behalf of the China Chamber of International Commerce, told First Financial Reporter that the larger the scale of taxation, the more people whose interests will be affected, that is, the larger the group of American companies participating in the next hearing. At the 232 and 301 hearings he attended, there were overwhelming objections to taxation.

"I have always felt that whether Trump wants to impose tariffs on $200 billion of Chinese goods itself is really a question, because the impact is really too big." In addition, there is a conjecture: the stronger the opposition heard by the Office of the United States Trade Representative (USTR), the more they can find themselves under the ladder. Sun Lei said.

The Trump administration plans to propose a 25 percent tariff on $200 billion of imports from China, initially set at 10 percent. Subsequently, the USTR said in a statement that it extended the deadline for filing a hearing to Aug. 13, while extending the deadline for written comments from Aug. 30 to Sept. 5. According to the schedule previously announced by the USTR, it is planned to hold a public hearing on the tariffs imposed on $200 billion of Chinese exports to the United States on the 20~23rd of this month.

The above-mentioned senior negotiator believes that in attracting foreign investment, China should adhere to expanding opening up, promote the facilitation of domestic investment, and pay more attention to the investment entry threshold, investment shareholding ratio, intellectual property protection of investment enterprises, and stability and predictability of investment policies. Conscientiously implement a series of opening measures recently introduced by the State Council to further improve the domestic investment environment.

The Politburo meeting said that in addition to doing a good job in stabilizing employment, finance, foreign trade, foreign investment, investment, and expectations, and protecting the legitimate rights and interests of foreign-funded enterprises in China, it is also necessary to promote reform and opening up, and continue to study and introduce a number of major reform measures that are effective and effective. It is necessary to implement the major measures of expanding opening up and greatly relaxing market access, promote the in-depth development of the "Belt and Road", and carefully hold the first China International Import Expo.

The investment field will welcome the new policy again, and the opening up will be accelerated

From any point of view, creating a more open investment environment is a response that all parties have agreed upon.

On July 30, the day before the Politburo meeting, China's Ministry of Commerce issued the Decision on Amendments (Draft for Comments) (hereinafter referred to as the Draft for Comments) to solicit public comments.

Specifically, the Draft simplifies the approval process and relaxes the requirements for foreign investors: it clarifies that foreign natural persons can strategically invest in listed companies, reduces financial requirements for foreign investors, removes the shareholding ratio requirement for foreign investors, reduces the lock-up period for foreign investors, and liberalizes cross-border share exchanges.

UNCTAD official Liang Guoyong commented to the first financial reporter that foreign investment into China is mainly through greenfield investment (new enterprises) and mergers and acquisitions. The amendments to this regulation affect the mergers and acquisitions and strategic investment of foreign capital in A-share listed companies, including transfer by agreement, directional issuance of new shares, tender offers, etc. The amendments to the regulations have some updates and refinements, such as the harmonization with the special administrative measures for foreign investment access (negative list). In addition, the size requirements for foreign investors have been reduced; The shortening of the time limit for equity transfer from 3 years to 1 year also facilitates post-investment exit.

Another senior lawyer in the field of foreign investment told the first financial reporter that this is a measure to attract foreign capital and provide more facilitation measures for foreign capital to enter the Chinese stock market. However, he also observed that this policy may be conducive to overseas mergers and acquisitions to be included in A-share listed companies again.

He analyzed that a round of strengthened supervision of overseas investment that began in 2016 made it impossible for domestic funds to go out, and many mergers and acquisitions were completed by listed companies after raising funds overseas. Those bridge funds are generally short-term and may face exit in as little as a year or two. If this policy is opened, it happens that overseas funds can include the overseas targets they hold into A-share listed companies, and then exchange them for equity or cash in listed companies. "Previously, investors only needed cash, but now they can give them equity. This can first, ease the cash expenditure pressure supported by listed companies, and second, these equity may have an excess income. ”

Other senior investment and legal professionals told the first financial reporter that according to past experience, whether this technological change can bring about change remains to be observed.

From the perspective of legislative evolution, in 2005, the China Securities Regulatory Commission successively issued the Notice on Issues Related to the Pilot Reform of Equity Division of Listed Companies, the Guiding Opinions on the Reform of Equity Division of Listed Companies, and the Administrative Measures for the Reform of Equity Division of Listed Companies, initiating the reform of equity division. In December of the same year, the Administrative Measures for Strategic Investment by Foreign Investors in Listed Companies was officially promulgated, the main purpose of which is to regulate the strategic investment of foreign investors in A-share listed companies after the reform of equity division, maintain the order of the securities market, introduce advanced overseas management experience, technology and capital, improve the governance structure of listed companies, and protect the legitimate rights and interests of listed companies and shareholders.

After more than 10 years of development, China's economic situation and securities market have undergone tremendous changes. In June 2018, the State Council issued the Notice on Several Measures for Actively and Effectively Using Foreign Capital to Promote High-quality Economic Development, calling for further promoting the steady growth of foreign investment and promoting high-quality economic development with high-level opening-up.

Macro concerns remain. According to the UNCTAD World Investment Report released in June, global international investment growth will be fragile, at around 5 per cent and at most 10 per cent, according to UNCTAD's World Investment Report released in June. The total will remain below the average of the past 10 years. The escalation and widening of trade tensions will have a negative impact on investment in global value chains. U.S. tax reform and increased competition for tax cuts in various countries will also have an important impact on global investment stocks and investment patterns.

Ministry of Commerce spokesman Gao Feng said at a regular press conference in July that recently, foreign companies such as General Electric, Ford, BMW, and Tesla have further expanded their production capacity, scale and investment in China. We will continue to improve the business environment, protect the legitimate rights and interests of foreign-funded enterprises in China, and make China continue to be the preferred place for foreign enterprises to invest. "China has a stable investment environment, strong industrial supporting capabilities, and a consumer market with huge potential, which is upgrading and constantly opening."