ANNUAL REPORT

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commitments, China has only taken incremental steps to broaden
market access for foreign investors.
China has affirmed its intent to further liberalize its foreign investment
regime in several high-level documents, including the
Third Plenum Decision and 13th Five-Year Plan (FYP). These documents
direct China to expand foreign investment access in China,
use a negative list approach * to govern access, set up more free
trade zones, and streamline its foreign investment regulatory framework.
112 However, the rising tide of complaints from foreign companies
indicates a lack of progress on liberalization. 113
The 13th FYP calls for a “fair competitive market environment,
highly efficient and clean governing environment, a just and transparent
legal and policy environment, and an open and inclusive
cultural environment” to improve the business climate for foreign
firms. 114 The plan encourages “expanding” market entry for foreign
companies in the service sector, including banking, insurance,
securities, and senior care, while “encouraging greater foreign investment”
in advanced manufacturing, high-tech, conservation and
environmental protection, modern services, and in central, western,
and northeastern China more generally. 115 It also promotes expanding
the construction of free trade zones and fully implementing a
“pre-establishment national treatment negative list management
system.” 116
However, the 13th FYP also makes it clear that market access is
encouraged only to the extent that greater access for foreign companies
benefits China’s economic priorities. According to a report from
the Center for Strategic and International Studies, “Investment is
encouraged only in those sectors where China is seeking to develop
domestic capacity to move up the value-added chain or in areas
required by previous commitments.” 117 (For more on China’s 13th
FYP, see Chapter 1, Section 3, “13th Five-Year Plan.”) Continued
asymmetries in market access have led the Office of the U.S. Trade
Representative (USTR) to conclude in its 2016 National Trade Report
on Foreign Trade Barriers that “sustained bilateral engagement
has not led to a significant relaxation of China’s investment restrictions,
nor has it appeared to curtail ad hoc actions by Chinese government
officials.” 118
Deteriorating Business Environment
These developments have contributed to increasing pessimism
among the foreign business community. According to the American
Chamber of Commerce in China’s (AmCham China) 2016 Business
Climate Survey, 77 percent of surveyed U.S. companies reported
they felt foreign businesses are less welcome in China than in years
past, while 83 percent of technology, R&D, industrial, and resources
companies reported China to be less welcoming (see Figure 9).† 119
* Under a negative list approach, countries specify which sectors are restricted or prohibited
for foreign investment.
† AmCham China’s 2016 Business Climate Survey analyzed responses from 496 U.S. companies
operating in China, representing 52 percent of the organization’s 961 member companies. Respondent
companies were categorized into four sectors: services (excluding information services),
information/knowledge-based services, R&D-intensive industries, and resources and industrial.
Thirty-one percent of respondents forecasted a revenue of $100 million or more for 2015. American
Chamber of Commerce in the People’s Republic of China, “2016 China Business Climate
Survey Report,” 2016, 8.