The U.S. Senate passed legislation that could disqualify many Chinese companies from listing shares on U.S. stock exchanges. The legislation, which was supported by lawmakers of both parties and was passed without objection, requires companies seeking access to U.S. stock markets to establish that “they are not owned or controlled by a foreign government”. The bill also asks foreign companies to submit audits for inspection by the Public Company Accounting Oversight Board, the non-profit body that oversees audits of all U.S. companies in public markets. Failure to provide the information for three consecutive years would lead to the delisting of a company’s shares. The bill can be applied to any foreign company seeking to raise capital in the U.S., but lawmakers, including Senator John Kennedy, a Louisiana Republican who is one of the bill’s sponsors, have said that the legislation was aimed at China and intended “to stop them from cheating” on U.S. exchanges.

The bill, first introduced in March 2019, would still need to pass the House of Representatives before it could be signed into law by President Donald Trump. The passage of the bill comes as tensions increase between the U.S. and China, first from their trade war and now amid a pandemic that has claimed more than 100,000 American lives. The American Securities Association, a trade group representing small and regional financial services firms, supported the legislation, saying that “for far too long, fraudulent Chinese companies have gotten a free pass to access U.S. markets and exploit American investors”.

However, some are urging caution in moving to hold Chinese companies to the same reporting standards as others. Asking Chinese companies listed in the U.S. to provide the same operational transparency as other firms is “reasonable” – but would put them in conflict with state secrets rules enforced by the Chinese government, said Anna Ashton, Senior Director of government relations at the U.S.-China Business Council. “Chinese companies, in order to comply with this rule, at least according to the Chinese government, would have to break state secrets laws, and so this looks like a way to try to encourage the Chinese government to change their laws,” Ashton said, as reported by the South China Morning Post.

There are 165 Chinese companies listed on U.S. stock exchanges.

Volvo Construction Equipment, an arm of Sweden’s Volvo Group, said it plans to move its Asian headquarters from Singapore to Shanghai. The reason for the shift is a new set of policies in China (Shanghai) Pilot Free Trade Zone, allowing foreign businesses headquartered in the zone to conduct offshore business. Foreign companies used to set up operations in China focused only on business in the domestic market, but policy changes now permit them to engage in offshore trade. Last year, the Shanghai arm of Volvo Construction Equipment was the first company in the zone to complete an offshore transaction, with coordination from the Shanghai government, supervisory authorities and banks. It shipped two excavators from its factory in South Korea to Nigeria as part of China’s Belt and Road Initiative (BRI). The machinery itself did not go through Shanghai, but all the paperwork, including orders, capital transfers and insurance, were arranged in Shanghai.

“Previously, policies here meant that we had to do off-shore trade through Volvo Asia in Singapore,” said Zhan Xu, Vice Chief Executive of Volvo Construction Equipment in China. Sales of the Shanghai operations now account for more than half of Volvo Construction Equipment’s global revenue, and the company said it expects to increase its Shanghai-based offshore business. The Lingang Special Area, set up last year as part of the Free Trade Zone, is designed to create a multinational headquarters cluster to develop deeper international trade. “For Shanghai, the aim is to attract multinationals to establish headquarters here and conduct supply chain management here,” said Zhang Yong, Researcher with the Comprehensive Institute of China (Shanghai) Pilot Free Trade Zone at Fudan University. Volvo’s Zhan said the company plans to move a whole set of related service industries, including legal affairs, tax and audit operations, to Shanghai from Singapore. Zhan cautions that the new offshore business is at an early stage and will need careful nurturing by all involved parties, the Shanghai Daily reports.

The coronavirus pandemic is unlikely to produce an exodus out of the Chinese market, and replacing China in the global supply chain is impossible to materialize. Most European companies are in China for the local market, which is still expected to grow extensively in the coming years and decades, said Joerg Wuttke, President of the European Union Chamber of Commerce in China told the Global Times. “The market is too important for European companies to leave,” he said. The Chinese market has world-class industrial clusters, a strong mix of skilled, less skilled and highly professional labor force, and some of the best infrastructure in the world, Wuttke noted. “Yet, taking all this for granted would be a mistake.” The Covid-19 pandemic has led to some companies looking to invest their limited resources elsewhere. Few are leaving China, although even fewer will be doubling down on the market anytime soon, not only because they lack the funds at the moment, but also because diversification of supply chains is being given extra value, according to Wuttke.

The pandemic dealt a blow to transnational investment and China also faces challenges in attracting new foreign capital, Commerce Minister Zhong Shan said. But China has many edges: ample, high-quality labor, comprehensive industrial support and a market of 1.4 billion people, Zhong said. “I believe smart entrepreneurs will not give up this massive and still growing Chinese market.” Foreign direct investment in China rose 11.8% year-on-year to CNY70.36 billion in April, after dropping in the previous two months. Thanks to the quick recovery of many sectors of the economy following the Covid-19 crisis, multinational companies are seeing again the benefits of serving a strong Chinese market, with imported and locally produced products and services alike, Denis Depoux, Global Managing Director of consulting firm Roland Berger, told the Global Times. “This crisis will only accelerate the importance of China as a major outlet for many products in the consumer and business markets,” Depoux said, noting that it will also accelerate the localization of more multinational companies in China. Yet, at the same time, some supply chains may diversify their localization, as well as “relocalize” in the European and U.S. markets as a risk mitigation measure that will be demanded by their shareholders, he added.

China-EU trade ties have advanced smoothly since the bloc replaced the U.S. as China’s second-largest trading partner in 2019. Bilateral trade expanded 5.7% year-on-year to CNY1.35 trillion from January to April this year, the Global Times reports. At a press conference on the sidelines of the NPC session, State Councilor and Foreign Minister Wang Yi said that “there is no fundamental conflict of interest between China and Europe” and that China and the European Union (EU) should not be “systemic rivals,” but “comprehensive strategic partners”. The China-EU diplomatic agenda has been hit by the pandemic, but leaders from both sides “will keep in close contact in preparation for the 22nd China-EU leadership conference,” he said.

The Flanders-China Chamber of Commerce in partnership with the China IPR SME Helpdesk organized a webinar focused on “10 Basic IP Tips for Doing Business in China” on 20 May 2020.

Mr. Peter Sczigel (China IPR SME Helpdesk) gave an introduction to the webinar and the services of the China IPR SME Helpdesk, followed by a presentation of the Flanders-China Chamber of Commerce by Ms. Gwenn Sonck (FCCC), Executive Director.

IP Business Advisor Matias Zubimendi gave a presentation on the key factors for a successful IP strategy in the Chinese market. The webinar ended with a Q&A session where attendees raised their questions and interacted with the speakers.

“Air Quality” and “Water Quality” Won the Championship

On May 8, 2020, the Weihai Eco-environmental Quality Bulletin 2019 was released, announcing that the “Air Quality” and “Water Quality” of Weihai both won the championship. The air quality has reached the national second-level standard for four consecutive years, ranking first in Shandong Province. The annual average pH value of urban precipitation ranged from 6.08 to 6.86, and no acid rain occurred the whole year.

The water environment quality index of the city ranked first in Shandong Province. The water quality of 12 main drinking water sources remained in good condition and 100% met the water quality standard. The quality of seawater in the coastal areas continued to be in a good condition. All environmental functional zones in coastal areas met the required standard. The ecological environment index of Weihai was 65.79, which ranked the first in Shandong Province and meets the requirements of the national ecological civilization construction index (≥ 60).