The 2020 Mid-Year Economic Update_long

China’s Economic Reform Agenda Includes Opportunities, Challenges for Foreign Firms

MAPI Report: While panned for being vague and not innovative, agenda has better chance of being implemented than past reforms.

Despite being comprehensive and ambitious, China’s new economic reform agenda has been criticized for being vague and not overwhelmingly innovative. According to a new Manufacturers Alliance for Productivity and Innovation report, however, says that China’s leaders have demonstrated a stronger will to ensure successful implementation this time.

In "China’s Economic Reform Proposals Have Strategic Implications for Multinationals", Economist Yingying Xu notes that China’s economic reform agenda for the coming decade presents both opportunities and challenges for foreign companies operating in China. Proposals cover the financial system, fiscal and tax policy, state-owned enterprises (SOEs), urbanization and inward/outward foreign investment.

“Rebalancing and structural reform will be China’s most fundamental challenges over the coming decade,” she said. “The preferential treatment enjoyed by foreign businesses in the past in exchange for China’s top-line growth target will no longer be aligned with the country’s macro policy priorities. The pendulum may swing in the other direction and foreign companies could be under more scrutiny.”

The report predicts that success for foreign firms will increasingly depend upon being able to articulate a clear and compelling local value proposition and creating more sophisticated levels of engagement with different levels of government and local firms.

“China’s need for modernization in multiple sectors such as healthcare, banking, finance, education, and environmental protection, will open new opportunities for foreign companies,” Xu concluded. “However, these companies will need to have sufficient patience, persistence, and strong stomachs for operating with considerable ambiguity in governmental guidelines and policies.”

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