American and European businesses and academics should work with China, and encourage and help China in further reform and opening up.
FDI inflows into China hit an all-time high at $130.1 billion in 2017, ranking 2nd in the world only after those in the US, a fact that explains the fundamentals of China’s open door policy. FDI from the US was $3.13 billion, down 18.2% from the previous year; and that from the EU 28 was $8.79 billion, down 9.0%. However, 2016 saw exceptionally high growth. If the two years 2016 and 2017 are put together, FDI inflows from the US and EU still grew by 20.8% and 23.6% respectively. Reports from the EU Chamber of Commerce in China, AmCham, and USCBC all show that most of their members are making money in China and China remains one of the top three destinations for their investment.
China is further opening up because of its own needs. China suffered poor economic growth in the years it closed its door and has benefited tremendously from opening up over the past 40 years.
Looking ahead, it is beyond any doubt that without an open, sophisticated, up-to-date financial system, the great rejuvenation of the Chinese nation would be in question.
China suffers from serious steel over-capacity. It slashed 115 million tons of capacity over the past two years, equal to total US steel capacity. Its steel exports fell by 37 million tons during the same period, more than total US steel imports in 2017. China has not imposed steel tariffs just to protect its home industry, nor is it calling for “China first”. In fact, its steel imports increased by 0.5 million tons over the past two years. It shows that China is sincere in opening up.
Problems, however, do exist. Therefore, tremendous efforts need to be made to ensure greater market access, equal national treatment, equal application of Made in China 2025 policy incentives and opportunities, cut red tape, and increase transparency and rule by law. In this process, American businesses and academics, as in the past, can continue to play a role in helping China. In turn, any progress will not only benefit China, but will also be shared by foreign investors at large.