China eases foreign investment rules as trade war looms

China has announced sectors of the economy where it will ease foreign investment rules, with leaders stepping up efforts to portray the country as opening up as they prepare for a possible trade war with the United States.
The new "negative list" outlines key reforms in the financial sector while dropping restrictions in areas including the car industry, agriculture, infrastructure and mining.

The list released by the National Development and Reform Commission (NDRC), will reduce the number of fields with limits from to 48, from 63 last year. But it also notes some sensitive areas such as culture and national security will continue to be protected. The announcement comes after the government unveiled changes earlier this year, which were seen as a nod to the United States and other western nations that have complained about lack of access to the world's number two economy for years.

Among them are the cancellation of foreign shareholding caps for banks and allowing 51 per cent control in some other financial fields for three years, after which restrictions will be scrapped.  However, critics say the policy comes with other limits that make only the largest foreign banks eligible for entry. The list also removes curbs on petrol station ownership, cereal trading, and electricity infrastructure, while also easing restrictions in the auto, aircraft and ship-building industries.

The announcement comes as the world's two largest economies prepare next week to slap the first batch of new border taxes on tens of billions of dollars in goods from both countries, fanning fears of a potentially damaging trade war. Facing outside protectionism, China must "make greater efforts to promote openness, promote reform, promote development, promote innovation through openness, and promote the further development of economic globalisation", the commission said in a statement.

"Investment cooperation between China and other countries and regions will be deepen further, with more extensive exchanges of capital, technology, management, and talents carried out." Beijing's rhetoric is in sharp contrast to Washington, where officials have been considering ways to limit Chinese investment and even the flow of some Chinese nationals to US universities.

Beijing has been keen to portray itself as the wronged party, repeatedly saying it does not want a trade war but will hit back with equal strength if forced into a corner. Officials also released a white paper yesterday mounting a full-throated defence of its pledged reforms and promises since joining the World Trade Organisation in 2001. "China has steadfastly carried out every promise made upon entering the World Trade Organisation," vice commerce minister Wang Shouwen said when introducing the report, and challenged countries that don't agree to "sue us at the WTO".