How China openly discriminates against foreign firms, investors

New Delhi, Jul 02, 2020, ENEWSTIME Desk

New Delhi, July 2 (IANS) As India takes a tough stand against Chinese companies and their operations on its turf in the wake of deadly Galwan Valley standoff, China which calls itself a harbinger of new-age trade has long been discriminating across industries, especially against foreign entities that come to work in that country.

According to a March survey by the American Chamber of Commerce in China, more than half of the respondents from the technology sector said they were being treated unfairly.

Foreign companies have long complained about unequal competition with Chinese businesses, particularly state-owned enterprises.

For example, the growth of Indian IT companies in China (TCS, HCL, Infosys, Tech Mahindra, Wipro) has been crippled by market access restrictions and non-tariff barriers, even after a decade of operations.

China has long maintained strict regulations on which websites and social media platforms are accessible in the country, and which are blocked behind China's so called "Great firewall" of internet censorship.

As China cries against the ban of its apps in India, websites that the Chinese government deems potentially dangerous - like Wikipedia, Facebook, Twitter, YouTube, and some Google services - are fully blocked or temporarily "blacked out" during periods of controversy, such as the June 4 anniversary of the Tiananmen Square massacre or Hong Kong's Umbrella Movement protests in the fall of 2014.

How China openly discriminates against foreign firmsChina's discriminatory policies against foreign investors are also well known.

In China, long-term visas are really difficult to get. Investors need to form a company and make an investment of either $500,000 in China's underdeveloped west, over $1,000,000 in a central province, or $2,000,000 in any other region to get a Chinese investment visa.

Foreigners (and locals as well) can't own freehold property in China. Every plot of land belongs purely to the state and can only be obtained on a 70-year leasehold at maximum. This makes business very difficult for real estate investors. Stock investors also face severe restrictions. Foreigners can only buy "A-Shares" via Hong Kong. You'll need to open a Hong Kong brokerage account to do so.

China relies on the Special Administrative Measures for Foreign Investment Access (known as the "nationwide negative list") to categorise market access restrictions for foreign investors in defined economic sectors.

Lack of transparency and lack of rule of law in China's regulatory and legal systems leave foreign investors vulnerable to discriminatory practices such as selective enforcement of regulations and interference by the Chinese Communist Party (CCP) in judicial proceedings.

Some foreign businesses have reported that local officials and regulators sometimes only accept investments with "voluntary" performance requirements or technology transfer that helps develop certain domestic industries and support the local job market.

Provincial and municipal governments in China will restrict access to local markets, government procurement, and public works projects even for foreign firms that have already invested in the province or municipality.

The double standards are such that the Chinese regulators have reportedly pressured foreign firms in some sectors to disclose IP content or provide IP licenses to Chinese firms, often at below market rates. These practices run contrary to WTO principles.

China also called to restrict the ability of both domestic and foreign operators of "critical information infrastructure" to transfer personal data and important information outside of China while also requiring those same operators to only store data physically in China.

Foreign firms also fear that calls for use of "secure & controllable," "secure and trustworthy," technologies will curtail sales opportunities for foreign firms or that foreign companies may be pressured to disclose source code and other proprietary information, putting IP at risk.

China imposes requirements that US firms develop their IP in China or transfer their IP to Chinese entities as a condition to accessing the Chinese market, or to obtain tax and other preferential benefits available to domestic companies.

In a 2019 CNBC CFO survey, 1 in 5 corporations said that China has stolen their IP within the last year.

According to a report "The Digital Hand" published by European Union Chamber of Commerce in China, implementation of China's Social Credit System (SCS) has the potential for discriminatory use towards international companies.

Even media and entertainment sector is not left without visible discrimination on ground.

The Chinese government is very selective when choosing which movies to make available. Many movies are either banned from distribution or altered in order to appease the Chinese censors.

The Chinese regime has edited movies to remove any mention of the legitimacy of Tibet, the villainization of the Chinese government or characters, the use of clotheslines in Shanghai, and excessive violence or sexual content.

‘Winnie the Pooh' was blocked on Chinese social media websites and apps such as WeChat. Images online have drawn a comparison between the fictional character and the leader of China, President Xi Jinping.