The state of the economy was uppermost on his mind when Premier Li Keqiang answered questions at his yearly press conference immediately following the closing session of the National People’s Congress (NPC) on March 15. The range of pre-arranged questions was much narrower compared to previous years, indicating that slowing economic growth and the influence of the world economic situation on China is the major focus of the Chinese leadership.

Premier Li Keqiang admitted that China’s economy has indeed slowed down, and so has the global economy. China has adjusted its GDP growth target for 2019 to a range from 6% to 6.5%, but he emphasized that China would not let economic indicators slide out of range. Premier Li said China made “strong, united efforts to advance supply side structural reforms” to achieve 6.6% GDP growth last year, against a backdrop of protectionism globally. He added that the country needed to take strong measures to cope with the current downward pressures on the economy, including quantitative easing. “However, such indiscriminate approaches may work in the short run, but may lead to future problems. We want to energize the market, instead,” he said. The Chinese government’s policies will remain stable stable in 2019, with an emphasis on continuing to cut taxes and fees as well as broadening market access and leveling the playing field.

The Premier said other measures include changing required bank reserve ratios and interest rates, but added China would not go for monetary easing. China would “support the economy, no matter what the situation is”. Larger tax and fee cuts for companies is the most important and crucial step in handling the pressures of the economic downturn. The VAT rate will be cut from April 1. “We will ensure the tax burden on companies only goes down,” Li Keqiang told hundreds of journalists at the Great Hall of the People in Beijing.

Li said he was happy with certain economic numbers. For instance, he said China’s fiscal deficit is budgeted to be 2.8% of GDP, which falls below the 3% line. He also said an economic growth rate between 6% and 6.5% is good. At the same time, the quality of these numbers are sometimes questioned – China’s official growth rate could be overestimated while its official fiscal deficit is widely seen as being underestimated. “China’s global ranking in terms of ease of doing business has moved up by 30 spots. There have been improvements, but we are still falling short in some aspects,” the Chinese Premier said.

“Big data suggests that ageing and child care services are two difficult issues facing China, and demands close government attention,” Li said as there are 250 million Chinese over 60, 170 million over 65, and up to 100 million below 6. “Services targeting these groups are lacking,” he commented. Li said there are only three beds for every 100 senior citizens and in big cities a person may need to wait till 90 for a spot in a care home.

Premier Li refused to be drawn into discussing the trade negotiations with the U.S., only saying that relations between China and the U.S. have gone forward despite the many twists and turns, due to mutual interests. “Economic decoupling between the U.S. and China is not realistic or feasible”, said Premier Li as he sidestepped questions on spying allegations made by the U.S. He did tell a reporter: “You said the Chinese government asks companies to spy on other nations. Are you talking about the government or individuals? This is not consistent with Chinese law, we did not do that and we will not do that in future.” The Chinese Premier said he was optimistic that the China-U.S. trade talks will yield results acceptable to both sides. “U.S.-China tensions are between two parties, we won’t exploit, let alone harm, the interests of third parties,” Li said when asked about relations with the EU. He said he will be going to Europe next month to promote ties.

Premier Li said the government should not exercise arbitrary oversight over new forms of business and business models, such as internet plus and the sharing economy, as they create new jobs and convenience for people. They should be allowed a chance to grow and develop. The Premier also said expressway tolls would be eliminated to ease traffic jams and promote industrial development, and that the price of electricity for industrial use would be cut by 10% this year.

At is closing session, the NPC gave approval to the new Foreign Investment Law (FIL). Only eight delegates voted against the law, and another eight abstained, while 2,929 voted to approve it. Fostering a favorable business environment by improving the rule of law and offering better legal services will be a priority for Chinese courts this year, Zhou Qiang, President of the Supreme People’s Court, said. The Foreign Investment Law will come into force on January 1, 2020.

The President of the Supreme People’s Court (SPC) pledged to increase pressure on financial crime after a sharp rise in prosecutions for illegal crowdfunding, pyramid schemes and bad loans. The Chief Prosecutor said 27,000 people were charged with running scams in 2018. Financial scams have spread rapidly across China in the past decade and victims of the schemes, which offer unrealistically high returns, often include the most vulnerable members of society such as low-income migrant workers, the elderly and the unemployed. Thirty-two officials at or above ministerial level were charged with corruption last year. Chinese courts across the country handled a surge in IPR-related cases – 288,000 of them, an increase of 42% year-on-year.

Premier Li’s “Report on the Work of the Government” was approved unanimously – 2,945 delegates voted in favor and three abstained – compared to 378 delegates who voted against Li’s first report as Premier in 2014. A total of 156 and 71 NPC delegates voted against the reports submitted by the President of the Supreme People’s Court and the Chief Prosecutor. Five to 10 years ago it was common for up to 600 of the nearly 3,000 NPC delegates to vote against the two reports to show their disapproval of China’s rampant corruption. Since then, the number of opposing votes has dropped, falling below 200 last year.

The European Commission issued a press release on EU-China relations, including 10 action points to be reviewed by the European Council on March 21. Following are the highlights:

The European Union and China have committed to a comprehensive strategic partnership. Yet, there is a growing appreciation in Europe that the balance of challenges and opportunities China presents has shifted. The European Commission and the High Representative aim to start a discussion to refine Europe’s approach to be more realistic, assertive and multi-faceted.

China is simultaneously a cooperation partner with whom the EU has closely aligned objectives, a negotiating partner, with whom the EU needs to find a balance of interests, an economic competitor in pursuit of technological leadership, and a systemic rival promoting alternative models of governance. The EU aims to exert more leverage for its objectives in full unity. EU Commission Vice President Jyrki Katainen said the EU is now putting forward concrete proposals on how to strengthen its competitiveness, ensure more reciprocity and a level playing field, and protect its market economy from possible distortions.

The EU pursues three objectives:
• Based on clearly defined interests and principles, the EU should deepen its engagement with China to promote common interests at the global level.
• The EU should robustly seek more balanced and reciprocal conditions governing the economic relationship.
• Finally, in order to maintain its prosperity, values and social model over the long term, there are areas where the EU itself needs to adapt to changing economic realities and strengthen its own domestic policies and industrial base.

The Commission and the High Representative invite the European Council to endorse the following actions:

1. The EU will strengthen the EU’s cooperation with China to meet common responsibilities across all three pillars of the United Nations, Human Rights, Peace and Security, and Development.
2. In order to fight climate change more effectively, the EU calls on China to peak its emissions before 2030, in line with the goals of the Paris Agreement.
3. The EU will deepen engagement on peace and security, building on the positive cooperation on the Joint Comprehensive Plan of Action for Iran.
4. To preserve its interest in stability, sustainable economic development and good governance in partner countries, the EU will apply more robustly the existing bilateral agreements and financial instruments, and work with China to follow the same principles through the implementation of the EU Strategy on Connecting Europe and Asia.
5. In order to achieve a more balanced and reciprocal economic relationship, the EU calls on China to deliver on existing joint EU-China commitments. This includes reforming the World Trade Organization, in particular on subsidies and forced technology transfers, and concluding bilateral agreements on investment by 2020, on geographical indications swiftly, and on aviation safety in the coming weeks.
6. To promote reciprocity and open up procurement opportunities in China, the European Parliament and the Council should adopt the International Procurement Instrument before the end of 2019.
7. To ensure that not only price but also high levels of labor and environmental standards are taken into account, the Commission will publish guidance by mid-2019 on the participation of foreign bidders and goods in the EU procurement market. The Commission, together with Member States, will conduct an overview of the implementation of the current framework to identify gaps before the end of 2019.
8. To fully address the distortive effects of foreign state ownership and state financing in the internal market, the Commission will identify before the end of 2019 how to fill existing gaps in EU law.
9. To safeguard against potential serious security implications for critical digital infrastructure, a common EU approach to the security of 5G networks is needed. To kickstart this, the European Commission will issue a Recommendation following the European Council.
10. To detect and raise awareness of security risks posed by foreign investment in critical assets, technologies and infrastructure, Member States should ensure the swift, full and effective implementation of the Regulation on screening of foreign direct investment.

The Joint Communication will be presented to the European Council on 21-22 March. The next EU-China Summit is scheduled for April 9, the EU Commission communicated in its press release. This week, Chinese Foreign Minister Wang Yi will attend the ninth China-European Union High-Level Strategic Dialogue in Brussels and President Xi Jinping will visit Italy and France.

A Spokesman for the China Mission to the EU said: “It is our hope that the EU could view China’s development and fresh efforts to promote reform and opening up in an objective, reasonable and fair light, and join forces with China for a sustained, healthy and steady growth of China-EU relations.”

The European Union Chamber of Commerce in China (European Chamber) has distributed a press release detailing its stance on the new Foreign Investment Law (FIL) which was approved by the National People’s Congress (NPC) on March 15, 2019 and will enter into force on January 1, 2020. Following is the European Chamber’s Press Release:

The final version of the Foreign Investment Law (FIL) took into account some of the European Union Chamber of Commerce in China’s (European Chamber’s) comments (recommendations for changes to articles 4, 9, 16, 23, 24 and 26), indicating that although there were irregularities with the review and consultation periods, feedback has at least been given a degree of consideration.

However, it is concerning that Article 40 was kept in the final draft. This is of particular concern to the European business community, as this clause allows for political issues to influence investor-state relations, and gives China power to take unilateral action against trading and investment partners based on a principle of perceived negative reciprocity. Its vague wording further adds to the legal uncertainty that the law creates for foreign companies. Conflicts and disagreements should be handled through established multilateral institutions like the WTO, or under the conditions of previously arranged agreements between China and any specific partner, and not through unilateral retaliatory measures.

The Chamber also maintains its original stance that there should be no legal distinction between foreign and local companies, unless it is to provide exceptions for legitimate reasons such as specific national security concerns. At the same time, it recognizes that the FIL plays an important role in formalizing the legal foundation for the shift from the old foreign investment catalogue to the new-market access system based on a negative list, which is hoped will provide increased certainty for European businesses.

Although many of the policy goals highlighted in the FIL appear in other pieces of legislation and have been mentioned in formal speeches, raising them to the level of a law is a positive development, as it increases the chances that they will become a reality. Full implementation of the law will now require both extensive follow-through from the administrative authorities at all levels of government, and full support of the legal system in cases where protections found within the FIL are not respected.

“More than anything else, foreign companies want equal treatment and opportunities,” said Mats Harborn, president of the European Union Chamber of Commerce in China. “While not all of our concerns were addressed in this law, it is time to move forward. We will closely monitor the FIL’s implementation to ensure that it is fully respected at all levels of government and in all corners of this country.”

A summit meeting between the Chinese and U.S. Presidents Xi and Trump, which was originally reported to be held by the end of March at Trump’s Mar-a-Lago resort in Florida, might be postponed till June according to the latest reports, thereby also postponing a solution to the trade dispute. Both Presidents are expected to attend the G20 Summit in Osaka, Japan, in June. President Trump expects news – positive or otherwise – in three to four weeks. “We’ll have news on China. Probably one way or the other, we’re going to know over the next three to four weeks,” Trump said during a St. Patrick’s Day reception in the White House’s East Room.

Chinese Premier Li Keqiang remained optimistic however, telling Chinese and foreign journalists at his yearly press conference that consultations between the two nations on economic and trade issues are still underway, and that he hoped the talks would deliver “good outcomes” and bring mutual benefits. “I believe this is also what the whole world would like to see,” he added. While dealing with China-U.S. trade frictions, the country will not take advantage of any third party nor target their interests, Li said, addressing whether Sino-U.S. trade talks would influence talks with the European Union. Premier Li also said economic decoupling from the United States was “not realistic”.

Chinese news agency Xinhua said “concrete progress” had been made on the text of a trade agreement following a phone conversation between Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. One of the main stumbling blocks to an agreement seems to be the insistence of U.S. negotiators to include an enforcement mechanism, allowing the U.S. to impose unilateral sanctions on China if it judged that China did not implement the agreement to its satisfaction. China argued that enforcement must be “two-way, fair and equal”.

Gary Cohn, the former Director of President Donald Trump’s National Economic Council, said the United States was “desperate right now” for a trade pact with China. “The President needs a win,” Cohn said. His comments stand in contrast to statements from Trump that he is in no rush for an agreement and is prepared to walk away from negotiations if the deal is not “right”. “I’m not in a rush whatsoever,” Trump told reporters at the White House.

Huawei pleaded not guilty last week to a 13-count indictment that alleged it defrauded U.S. banks by concealing business dealings with Iran in violation of U.S. sanctions. James Cole, a U.S. lawyer for Huawei, entered the plea on behalf of the company and its U.S. subsidiary, Huawei Device USA Inc, at an arraignment in the U.S. District Court in Brooklyn, New York, according to U.S. Attorney’s Office Spokesman John Marzulli. The plea launched the effort to defend Huawei against charges of bank and wire fraud. The company, based in Shenzhen, Guangdong province, and its U.S. unit also are accused of defrauding HSBC and other banks by misrepresenting Huawei’s relationship with the suspected front company, Skycom Tech, in Iran.

A federal grand jury in Brooklyn charged Huawei and its CFO Meng Wanzhou with money laundering, bank fraud, wire fraud and conspiracy. Huawei was also charged with conspiracy to obstruct justice. A separate indictment from Washington state accused Huawei, Skycom and Meng of stealing trade secrets from T-Mobile. The next hearing is scheduled for April 4. Huawei has countersued the U.S. government claiming it overstepped its bounds when it banned the use of Huawei’s equipment by government agencies.

Huawei already strongly denied that it would use its equipment to spy on foreign governments and companies for the Chinese government. Huawei Founder Ren Zhengfei repeatedly said in interviews that he would “definitely” refuse any requests by the Chinese government to hand over user data. Chinese Premier Li Keqiang briefly touched on the subject of spying during his annual press conference. “Let me tell you explicitly that this is not consistent with Chinese law. This is not how China behaves,” Li said. The U.S. government is still pushing other governments to join it in banning the use of Huawei’s equipment in their 5G networks due to security concerns. U.S. Secretary of State Mike Pompeo warned European countries in February that using Huawei’s equipment could hurt their ties with Washington.

British universities with links to Huawei have become concerned that the controversy surrounding the company could negatively affect the image and research of their institutions. Staff from King’s College London, Queen Mary University of London, the University of Manchester, and Imperial College London have avoided contact with Huawei, the South China Morning Post reports. Oxford University in January became the first British tertiary institution to ban new grants or donations from Huawei based on “public concerns” related to national security. Recently, top U.S. universities such as Princeton and Stanford have rejected research funding from Huawei amid growing pressure from the government. A staff member of King’s College London said: “Some of you have asked are we still allowed to receive funding from Huawei. I have asked for guidance. My guess is: today it’s OK, but tomorrow?”.

Meanwhile, Huawei said it received the world’s first 5G CE certificate for its Mate X model from German third-party independent certification and inspection group TüV Rheinland. Such certification is a requirement of the EU prior to importing and selling products on the European market. Huawei Mate X is the world’s fastest foldable 5G smartphone released by the Chinese company on February 24 ahead of the Mobile World Congress 2019 in Barcelona, Spain.