It’s time for China to honour its pledge to open up the market and society – and play fair

Michael Clauss calls on party leaders to seize the opportunity of their sixth plenum to ease their tightening grip on foreign groups and businesses

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Michael Clauss

Published: 9:01am, 23 Oct 2016Updated: 5:59pm, 23 Oct 2016

Even companies which have localised production beyond the already massive requirements are facing an increasingly unsurmountable protective wall favouring Chinese state-owned enterprises. Illustration: Craig Stephens

The Communist Party’s sixth plenum, starting this week, will deal with a chief topic of China’s reform policy: discipline and anti-corruption within the party. Looking at this choice, it seems that the leadership does have its finger on the pulse of the population. A recent Pew poll confirmed that corrupt officials are the No 1 concern in China, with a whopping 83 per cent of people polled considering this a major or somewhat major problem.

Why Xi Jinping’s bid to put ‘power in a cage’ must go to the very top

At this point in time, one year before the present five-year political cycle of the party ends, it is worth looking at what China has achieved from an outside perspective.

The third plenum of 2013 laid out an impressive reform plan. It put the market at the centre of economic policy. Even though it made only scant reference to the outside world, our hopes were high. If the party meant business, letting market forces rule would mean removing privileges for state-owned enterprises, creating a more level playing field with non-state-owned companies. This would benefit the bulk of foreign investment, which is part of the non-state economy.

Chinese leaders at the closing of the National People’s Congress in Beijing this year. Photo: Simon Song

Communist Party pledges greater role for constitution, rights in fourth plenum

The fourth plenum in 2014 also generated certain hopes. This was the first time a conference at this high level had been dedicated almost exclusively to the rule of law. This was also highly important to us. German companies, non-governmental organisations, scientists, artists and students see unclear, unpredictable and unevenly enforced laws and regulations as one of the main obstacles to their activities in China.

An unprecedented wave of complaints indicate a clear trend that doing business in China has become more difficult

Nevertheless, looking at the “reform dividend” for our companies and other actors working in China after three years, it is hard to hide our disappointment. Less corruption is certainly a positive factor. But will it last or can it only be sustained with unrelenting pressure from the top, which in turn can have unintended side effects? Less graft is often accompanied by less or slower activity when it comes to granting licences and approvals.

An unprecedented wave of complaints reaching our embassy and consulates indicate a clear trend that doing business in China has become more difficult, and not just doing business: we have a growing number of complaints from Germans and other Europeans wanting to travel to China being turned down on unspecified security grounds. This has even included sportspeople and scientists. And despite all assurances, the new NGO law, scheduled to take effect next January, looks set to undermine and even halt activities of German organisations. The draft rules issued have not allayed concerns of a possible bureaucratic nightmare.

An electric taxi on a street in Taiyuan, the capital of Shanxi province. In new rules on electric vehicles, China wants manufacturers to localise not only the entire production but also the entire development process within China. This means foreign automobile manufacturers must hand over 100 per cent of their technology to local partners. Photo: Xinhua

Is China making life difficult for foreign companies?

To name but a few examples that point at less openness and a lack of rule of law: