China's Third Plenary Session: Potential Economic Reforms Could Decide Fate Of Foreign Companies

 @SophieXSong
on November 05 2013 2:47 PM
Xi Jinping
President Xi Jinping led the Third Plenum meeting last month, which unveiled many important reforms for the coming decade. Reuters

As the Third Party Congress looms, Foreign companies doing business in China are waiting anxiously for a sign their future in the country will be easier than it is presently, as they haven't fared well at all thus far under the Xi Jinping administration.

When Xi took over, many were hopeful he would push for strong economic and political reforms, the Financial Times reported on Monday, including strengthening the country's legal system and reducing the role of the state in the economy. Instead, Xi has spent most of 2013 restoring the Communist Party to its former glory.

A number of foreign companies, including Apple, GlaxoSmithKline, Volkswagen and Samsung, have been targeted by corruption investigations, price-fixing accusations and state media-led smear campaigns. With the latest attack, this one on Starbucks for overcharging customers, experts and netizens alike have criticized the administration and state media for letting state owned enterprises carry on with the same practices for which foreign companies are punished.

“The government is very aware of the enormous value of the Chinese market for multinationals, and it is becoming more ruthless in ensuring that the money is kept in the family rather than letting outsiders grab the fat profits that are available now,” said Kerry Brown, professor of Chinese politics at Sydney University, according to the Financial Times. “Politically it is also a very easy populist move to beat up on foreign companies; much easier than taking on big Chinese companies and their powerful domestic backers.”

But with the Third Plenary session of the 18th CPC Central Committee coming up this week, many are hopeful that the game plan that the Party Congress will announce during the meeting, which could outline a number of important economic reforms on Xi’s agenda and set the tone for his administration in the coming years, will be one that is friendly for foreign companies.

A strong dose of nationalistic, neo-Maoist rhetoric at the congress could signify that hard times are here to stay for global companies as China continues its crackdown, while more welcoming language may signify an improvement in their fortunes. Morale is certainly not high among foreign executives at the moment following the tumultuous year in China.

“The perception among foreign investors is that it is getting harder to do business here,” says Michael Crain, Beijing director of administration for law firm Bingham McCutchen, which advises international companies doing business in China, according to the Financial Times

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