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China promises openness, but difficulties remain for global firms

| Apr 23, 2021 | Business Issues

Chinese President Xi Jinping promised to maintain an open economy for foreign companies and also asked for cooperation during China’s annual Boao Forum on April 20. The conference of business and financial leaders has long served as a showcase for China’s economic proficiency and global leadership, while Xi continues to portray himself as a longtime proponent of free trade and globalization.

His comments come after the global business landscape has proven more challenging due to escalating tensions regarding China’s trade policies, alleged human rights violations and restrictions it implements on companies that want to set up operations in the country.

Global companies at a disadvantage

In an apparent criticism of the Biden administration’s support to ramp up U.S. high-tech manufacturing, Xi warned that such a “decoupling” attempt would cause harm to the interests of others without any benefits to oneself.

U.S. companies know how challenging it can be to invest in China, often handcuffed by demands and strict regulations from its government. Global companies must follow China’s rules to set up operations in the country. For several years, a number of global companies have been willing to play by China’s rules because they cannot ignore its growing economy, growing middle class and its demand for so many consumer goods.

The trade-offs are many, too, as foreign companies often are at a disadvantage when attempting to work with China. It remains a challenge to enter China because global companies must deal with strict regulators who have great power as to what companies may set up stakes in the country as well as what they are allowed to do. For example, global companies often must concede certain attributes of their operations and business to enter China’s market.

Confronted with such challenges, U.S. companies must turn to a legal advocate who can help them maneuver China’s regulatory maze when it comes to business.