China vows foreign-firm concessions

BEIJING -- China on Tuesday promised more improvements in conditions for foreign companies including an end to officials pressing them to hand over technology -- a key irritant in its tariff war with Washington.

The announcement adds to a drumbeat of market-opening promises by the communist government, which is trying to make China's cooling, state-dominated economy more productive.

Beijing also will ease restrictions on foreign competitors in some newly opened finance businesses, the Commerce Ministry said.

Complaints about Beijing's technology ambitions helped to spark its tariff war with President Donald Trump.

Trade negotiators are working out details of an Oct. 11 agreement under which Trump delayed a planned tariff increase on Chinese imports. Trump said Beijing agreed to buy more American farm goods in exchange, though China has yet to confirm details of its commitment.

Business groups welcomed the agreement as a possible step to breaking a deadlock in the 15-month-old conflict, though the two sides have yet to report progress on their core disputes over Beijing's trade surplus and technology policies.

Those include complaints from Washington, Europe and other trading partners that Chinese development plans are based in part on stealing or pressuring companies to hand over technology.

Authorities will be banned from "explicitly or implicitly" pressuring companies to give up technology, said a ministry official, Ye Wei.

That pledge, if carried out, builds on a law enacted in March that prohibits use of "administrative tools" to force companies to give up industrial secrets. Business groups said that might leave officials free to use other leverage.

"Administrative organs may not implicitly or explicitly force the transfer of technology by foreign investors or foreign-invested enterprises," Ye said.

That still leaves open the question of foreign companies that are required to work through joint ventures with Chinese partners. For such ventures to function, the foreign partner often must hand over technology or teach a potential competitor how to develop its own.

China is trying to appeal to foreign companies, some of which have postponed or shifted investments to other countries out of concern about the effects of U.S. and Chinese tariff increases.

A ministry statement also promised to "eliminate all restrictions on the scope of business" of foreign banks, securities companies and fund managers. It pledged to "remove the requirement on total assets" for establishing a foreign-owned bank." We will move faster to open finance industries," said a deputy commerce minister, Wang Shouwen.

Full foreign ownership of futures traders will be allowed as of Jan. 1, followed by mutual fund companies on April 1 and securities firms on Dec. 1 next year. Until now, foreign investors have been limited to owning 51% of such businesses.

At the same time, China is accusing the U.S. of "economic bullying behavior" after U.S. regulators cited security threats in proposing to cut off funding for Chinese equipment in U.S. telecommunications networks.

"We would like to urge the U.S. once again to stop abusing the concept of national security," Foreign Ministry spokesman Geng Shuang said Tuesday.

The Federal Communications Commission has scheduled a vote for next month on whether to bar telecom companies from using government subsidies to pay for networking equipment from Huawei and ZTE.

The move mostly affects small, rural companies, since larger U.S. wireless companies do not use equipment from the two Chinese firms.

The agency also is exploring the impact of requiring companies to rip out their current Huawei and ZTE equipment, a demand a trade group for small rural wireless carriers has said would cost up to $1 billion.

Bills in Congress have proposed setting $700 million to $1 billion aside for telecom companies to replace their networks.

The U.S. government says Huawei, the world's biggest supplier of telecom gear and No. 2 smartphone manufacturer, poses an espionage threat. It has presented no evidence of its equipment being used for spying by the Chinese government and both Huawei and ZTE have denied their equipment is used for such purposes.

Business on 10/30/2019

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