2017: A turning point for China.
An opportunity to promote openness and foreign investment?

BusinessEurope, the European Union Chamber of Commerce in China and the EU-China Business Association are organizing an exclusive dialogue with the European Commission Vice President for Jobs, Growth, Investment and Competitiveness, Jyrki Katainen and the newly elected President of the European Chamber of Commerce in China Mats Harborn.

The purpose of this event is to take stock of the most important current and upcoming developments in the EU-China relations and how these might affect EU businesses. Concurrently, this event will serve as an opportunity for the European Chamber to present its annual position paper on China.

This is a critical year for China. During the 1st Plenary Session of the 19th Central Committee of the Chinese Communist Party, which will take place in autumn, the members of the party’s more powerful organisations will be elected: the Politburo, the Standing Committee and the Chinese Military Commission. The government will therefore have a new composition, starting from March 2018.

Hopefully, these changes in the Party and the Government will bring a new push to the symbolic promises made in the past years, i.e. the Third Plenum’s Decision, the 13th Five-Year Plan, President Xi’s speech at the World Economic Forum in Davos, and the State Council Document No.5, released in January 2017 to promote openness and the utilization of foreign investment.

China is aiming to become a high-income country by 2020, by increasing its capacity for innovation, reforming state-owned enterprises, addressing overcapacity and developing its environmental technology industry. The European business community in China monitors whether these announced changes will be achieved through market forces or whether the government will keep a foot into the economy.

The lack of reciprocity in the field of market access, with increased Chinese investments in Europe, coupled with a drop in European investment in China, is another challenge companies face. The absence of a level playing field in terms of market access in China also fuels the concern of certain Member States vis-à-vis the Chinese presence in key economic sectors in the EU. This also led certain Member States to take a position on screening investments from abroad, amid concerns about increasing investment and company takeovers by non-EU investors.

In this context, progress in the negotiations on the EU-China Investment Agreement, started in early 2014, may represent a landmark step in the relations between the EU and China. European businesses are hopeful that China will use these agreements to promote greater international competition and cooperation in its marketplace through meaningful liberalisation. The direction that these developments will take will be critical for Europe’s mission for growth and the future success of European industry in both Europe and China.

During the event, European Commission Vice President for Jobs, Growth, Investment and Competitiveness, Jyrki Katainen, will deliver a keynote speech on the EU-China trade and investment relations.

Agenda

13h00 – 14h00 Registration and lunch reception

14h00 – 14h10 Introduction by Ms Luisa Santos, Director, BusinessEurope

14h10 – 14h20 Speech on EU-China trade and investment relations by Mr Jyrki Katainen, European Commission Vice-President for Jobs, Growth, Investment and Competitiveness

14h20 – 14h30 Speech by Mr Mats Harborn, President, European Union Chamber of Commerce in China
14h30 – 14h50 Moderated panel discussion and Q&A

14h50 – 15h00 Conclusions by Mr. Philippe Van der Donckt, Vice-Chairman of the EU-China Business Association

Practical information

Date: Thursday, 28 September 2017, 13:00 – 15:00
Location: BusinessEurope, Avenue de Cortenbergh 168, 1000 Brussels
Participation fee: €60

Registration

Please CLICK HERE to register. The cost of participation is 60 EUR and you can pay online. If you would like to pay by wire transfer, please contact Alexandra Aivali at a.aivali@businesseurope.eu

On 15 September, the Flanders-China Chamber of Commerce, represented by Mr Stefaan Vanhooren, Chairman and Ms Gwenn Sonck, Executive Director, received a Shanghai delegation with leaders from the Minhang District. The aim of the visit was to learn about industry 4.0 in Flanders. Presentations were given by Agoria, Flanders Make and Ghent University and the Flanders-China Chamber of Commerce.

Minhang district lies in the heart of the Greater Shanghai Area. It has Xuhui District and Pudong New Area on the east, the Huangpu River and Fengxian District to the South, Songjiang District and Qingpu District in the west, and Changning District and Jianing District to the North.

Strategic emerging industries are: new energy, advanced key equipment, bio-medicine, new generation of IT Technology, new materials, new energy, automobile and energy-saving and environment protection.

Interested companies can obtain the Minhang Investment Guide of the year 2017 by sending an e-mail to: info@flanders-china.be

Corporate spending on innovation and technology has been growing twice as fast in China than in the U.S. over the past two years, fueled by accelerating migration to cloud services. In a latest research report by U.S. investment bank Morgan Stanley, information technology (IT) spending by Chinese companies is projected to grow 11.2% this year, more that double their American counterparts’ 5.3% rise. The study, led by Equity Analyst Grace Chen, surveyed 126 chief information officers (CIO) in China and an undisclosed number of CIOs in the U.S.

Chinese companies spent 10.2% more on technology last year, against 4.4% in the U.S. The findings also show Chinese cloud and customer relationship management (CRM) software spending growing at its fastest pace in three years, and the winners of such acceleration are the “leading public cloud vendors, and select semiconductor suppliers”.

Among Chinese cloud providers, AliCloud and Tencent are the industry leaders, while IBM, in partnership with Wanda, is the No 1 foreign supplier, ahead of Amazon Web Services (AWS) and Azure. Private-sector corporate investment will accelerate this year, recovering from the low levels of 2016. Lower real interest rates will stimulate investment in productivity-enhancing technologies, such as robots and cloud-based services, according to Gordon Orr, Senior Adviser at McKinsey China. “Our survey shows more than 30% of CIOs have adopted Alicloud, and that China will maintain a similar leading share over the next three years, echoing our positive view,” Morgan Stanley Analysts said.

“What surprised us most, was CIO’s optimism about Tencent and Huawei in public cloud: Tencent ranks second with a 15% share predicted to rise to 23% within three year,” they added. Morgan Stanley also noted Huawei, which trails AliCloud and Tencent in public cloud, tops its competitors in private cloud, a result of Huawei’s competitive advantage in having a hardware business. In China, companies interviewed said about 34% of their workload is handled using the cloud. The analysts said that figure will be bumped up to 53% by the end of 2020, and more specifically, the percentage of workload on the public cloud is expected to rise from 20% to 29%. The size of the public cloud as a service market in China is expected to be valued at USD2.4 billion this year, up from USD1.8 billion in 2015, and then to grow to USD3.8 billion by 2020, the South China Morning Post reports.

One of the biggest Bitcoin exchanges in China and the world announced that it would stop all trading at the end of this month, following new Chinese government regulations clamping down on crypto-currencies, and its ban on initial coin offerings (ICO). BTCC – China’s No. 2 Bitcoin platform by volume and the world’s third-largest – said that “after carefully considering” the announcement by Chinese regulators, it will “stop all trading” on September 30. It has already stopped registering new users, but foreigners can still use its services in overseas markets, Shanghai-based BTCC said in a statement.

Bitcoin exchanges OKCoin and Huobi issued statements saying they would shutdown all trading between bitcoin and the yuan by October 31. At least 20 smaller exchanges in China followed suit. Besides Bitcoin, other crypto-currencies, such as Litecoin and Ethereum, are also affected.

The National Internet Finance Association of China said that there was “no legal basis for platforms which engage in the trading of various forms of ‘virtual currencies.’” The Association, which was created by the People’s Bank of China (PBOC), warned on its website that such currencies are “increasingly used as a tool in criminal activities such as money laundering, drug trafficking, smuggling and illegal fundraising.” The Bitcoin’s price crashed from a high of around USD4,359 to below USD3,000 before recovering.

Jiang Yang, Vice Chairman of the China Securities Regulatory Commission (CSRC), said at a forum in Beijing that China should be more cautious on innovation in the finance industry to prevent fiscal and systematic risks.

U.S. President Donald Trump has blocked the USD1.3 billion take-over of Lattice Semiconductor Corp, a publicly-traded Oregon company, by Chinese-owned Canyon Bridge Fund on national security concerns. The Committee on Foreign Investments in the United States (CFIUS) and President Trump determined that “the transaction poses a risk to the national security of the United States that cannot be resolved through mitigation,” prohibiting Canyon Bridge, its partner Yitai Capital and Yitai’s parent, the China Venture Capital Fund Corp (CVCF), from purchasing the U.S. firm, due to the importance of the semiconductor supply to the U.S. government, including Lattice’s programmable logic devices.

Other Chinese deals under review include MoneyGram International’s proposed sale to Ant Financial, the financial-services company of the Alibaba Group. The U.S. government is also examining an agreement by Chinese conglomerate HNA Group Co to buy a stake in SkyBridge Capital.

China’s Ministry of Commerce expressed “concern” over the decision. Spokesman Gao Feng said that while each country has a right to probe investments in “sensitive fields”, the power should not be used as “an instrument for implementing protectionism.” China “hopes relevant countries can treat Chinese companies’ overseas acquisitions objectively and impartially, give fair treatment to such normal business practices, and create a reasonable and transparent business environment to avoid impacting investors’ confidence,” he said.

Xinhua News Agency commented that “Chinese investment is not a Trojan horse” and that President Trump’s decision to block the deal was “penny wise and pound foolish”. “It is in the interests of the United States itself to focus on the bigger picture and have a long-term vision, instead of being preoccupied by immediate interests,” it added.

Trump’s predecessor, Barack Obama, had also intervened to prevent a similar deal involving semiconductors on security concerns last year. Chinese government-backed Grand Chip Investment scrapped plans to buy German semiconductor equipment maker Aixtron in December. Still, it is unusual for a U.S. President to block a business deal over national security concerns – Trump’s was just the fourth such order in the past 25 years.

“It is important to note that the U.S. government has been particularly concerned with foreign investment, particularly Chinese investment, into the U.S. semiconductor industry for years,” said Lawrence Ward, Partner at the international law firm Dorsey & Whitney.

In another setback for Chinese investment abroad, a court in the Ukraine has frozen the 41% stake of Beijing Skyrizon Aviation in one of the world’s largest aircraft and helicopter engine manufacturers Motor Sich. The Ukrainian security services allege that the purchase of the company’s stock by groups controlled by Beijing Skyrizon Aviation was an attempt to take its assets out of the country. Motor Sich’s technologies could be valuable to Chinese scientists and engineers working on developing high-powered aircraft engines.