China stays the course on reform after third plenum, leaving Western businesses in limbo

“Instead, it seems that we must prepare for a policy marked by caution and continuity.”

A communique released after the plenum’s conclusion covered the broad strokes, to be followed with more detail in later publications.

However, the European Chamber of Commerce in China said the communique does not offer sufficient detail to ascertain whether meaningful changes will be forthcoming.

“It is still positive that China’s leadership has again acknowledged the headwinds facing the economy and signalled [its] intent to deepen reforms to create a fairer, more dynamic market environment,” said the chamber, adding it will monitor any subsequent action closely.

More positive signals for overseas firms came in passages related to opening up, which the communique deemed a “defining feature” of Chinese modernisation. “We will steadily expand institutional opening up, deepen foreign trade structural reform [and] further reform the management systems for inward and outward investment,” the document read.

While future dispatches may shed more light on specifics regarding the implementation of these principles, many foreign businesses remain guarded in their forecasts.

“British companies now need to see in the coming weeks and months specific measures that follow up on the plenum’s broad commitments,” said the British Chamber of Commerce in China.

“We have noticed the plenum’s commitment to actively address domestic issues, prioritise challenges in the property sector and local government debt, and let market mechanisms play a great role.”

James Zimmerman, a partner at international law firm Perkins Coie in Beijing, said the communique is loaded with political jargon and short on specifics – in line with his expectations.

“Hopefully the details will be reflected in follow-up reports,” said Zimmerman, also a former chairman of the American Chamber of Commerce in China.

“That said, foreign business still has a lot of questions that remain unanswered and, without greater clarity, investment plans might remain on hold.”

Eric Zheng, president of the American Chamber of Commerce in Shanghai, said there were several sections of the communique that should be of interest to US investors.

“It was reassuring that the plenum recognised the need to create a fair market environment, support the development of the non-state sector and allow all sectors to enjoy equal access to production factors, market competition and legal protection,” Zheng said.

This uncertainty has been reflected in the figures for foreign direct investment (FDI), with official data from the Ministry of Commerce showing the country’s FDI dropped 28.2 per cent in the first five months of 2024 to 412.5 billion yuan (US$57.94 billion). The ministry stopped publishing FDI figures in US dollar terms last year.

Meanwhile, Han Wenxiu, deputy director of the general office of the Central Economic and Financial Affairs Commission, said at a media briefing on Friday that China will strive to stabilise foreign trade and investment.

“China will adopt international standards in trade and property rights protection, industrial subsidies, procurement and finance and establish an efficient cross-border data flow mechanism,” Han said.

“Restrictions on foreign investment in the manufacturing sector will be reduced to zero while we will expand the catalogue of industries open for foreigners, including services.”

Han also said Beijing will further improve “convenience arrangements” for business personnel and tourists visiting China, particularly in accommodation, medical care and payment platforms.