In the news: China's leaders pledge to stabilize the economy, better handle foreign disputes, avoid layoffs in SOE reform and encourage more FDI in certain sectors

SPC chief justice tells courts to give foreigners better legal service

The president of the Supreme People's Court (SPC), Zhou Qiang, has asked courts to better handle disputes involving foreigners, particularly in the marine sector, as the country opens up and attracts more overseas enterprises. Last year 10 Chinese marine courts concluded 1,030 cases involving foreign litigants – a 6.85% increase from the previous year. Zhou said efforts to improve services for cross-border commercial disputes will aid the country's Belt and Road initiative, and asked all courts to treat both Chinese and foreign litigants equally. The call for enhanced enforcement all around has been well received by practitioners. Settling disputes and enforcing results has always been a challenge for foreign investors in China. The three most popular arbitration centers among Asian parties—the International Chamber of Commerce (ICC), the Hong Kong International Arbitration Centre (HKIAC) and the Singapore International Arbitration Centre (SIAC)—set up representative offices in the Shanghai Free Trade Zone recently. And even if they can't administer cases on the ground yet, this does indicate that China is opening up and the business environment is improving.

China promises to avoid layoffs in SOE consolidation

The head of China's State-owned Assets Supervision and Administration Commission (SASAC) said China prioritizes consolidation over bankruptcies in its reform of state-owned entities (SOEs). He said SASAC will protect workers' rights, preventing a repeat of the late 90's mass restructuring when tens of millions of state workers lost their jobs. He praised the progress made so far in merging firms in the oil, banking, telecom, shipping and railway sectors. The government will continue to implement a plan to cut excess capacity and shut loss-making firms. The reorganization of SOEs, given how sprawling and bloated some are, will probably entail at least some redundancies. The human resources minister told reporters last week that China will offer assistance to people who lost their jobs in the government's drive to cut excess capacity, and also recently said about 1.8 million steel and coal workers will be laid off. A state-owned mining group recently laid off 22,500 workers, and others including China Minmetals are also under pressure to cut jobs. It remains unclear where exactly the 10 million new jobs promised by the NPC plan to be created this year will come from.

More FDI encouraged in manufacturing and service

China's minister of commerce Gao Hucheng said that foreign investors' access to service and high-end manufacturing sectors will be further eased. Finance, education, culture and logistics sectors will be opened wider to foreign capital and restrictions will be relaxed, as an increasing number of foreign investors shift their focus to high-tech manufacturing in particular. China's central and western regions will be a key focus of the Belt and Road initiative, as only 16% of foreign investment in 2015 went to these areas, Gao said. Sectors like education and culture appear unlikely to be inviting for foreign companies. China would probably do well to lower restrictions in areas that many foreign companies are shifting toward, like high-tech manufacturing, as the slowdown has led many to pack up and head for cheaper places like Vietnam for factories. Rolling out more incentives and reducing administrative barriers–and most importantly, implementing these changes consistently–could quicken China's pace of enhancing these industries.

Premier Li Keqiang's March 16 press conference

At a news conference in Beijing marking the end of the 12-day National People's Congress, Premier Li Keqiang told reporters that although China will face short-term volatility, it has an “innovative” method in place to stabilize the economy in the long run. The nation needs to “keep its eyes open for financial market risks, prevent these risks from spreading from the current form and enhance supervision,” he said. He emphasized that “reform and development are not in conflict” and that although he is unable to predict whether China can achieve its economic growth target (6.5%-7%), staying on the reforms course will prevent China from suffering a hard landing. The Hong Kong-Shenzhen stock connect will also probably start this year. Premier Li acknowledged financial risks such as an increase in banks' non-performing loans, pledging to promote market-oriented policy changes and to support the real economy and smaller businesses. He addressed the need to convert the country's mounting debt into equity – a comment met with controversy as the CBRC chairman had said earlier that morning that China must move cautiously regarding debt-to-equity swaps. Reports say authorities are drafting rules to make it easier for lenders to convert bad loans into equity stakes in debtor companies.

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Last week's news roundup: NPC takeaways

SPC chief justice tells courts to give foreigners better legal service

The president of the Supreme People's Court (SPC), Zhou Qiang, has asked courts to better handle disputes involving foreigners, particularly in the marine sector, as the country opens up and attracts more overseas enterprises. Last year 10 Chinese marine courts concluded 1,030 cases involving foreign litigants – a 6.85% increase from the previous year. Zhou said efforts to improve services for cross-border commercial disputes will aid the country's Belt and Road initiative, and asked all courts to treat both Chinese and foreign litigants equally. The call for enhanced enforcement all around has been well received by practitioners. Settling disputes and enforcing results has always been a challenge for foreign investors in China. The three most popular arbitration centers among Asian parties—the International Chamber of Commerce (ICC), the Hong Kong International Arbitration Centre (HKIAC) and the Singapore International Arbitration Centre (SIAC)—set up representative offices in the Shanghai Free Trade Zone recently. And even if they can't administer cases on the ground yet, this does indicate that China is opening up and the business environment is improving.

China promises to avoid layoffs in SOE consolidation

The head of China's State-owned Assets Supervision and Administration Commission (SASAC) said China prioritizes consolidation over bankruptcies in its reform of state-owned entities (SOEs). He said SASAC will protect workers' rights, preventing a repeat of the late 90's mass restructuring when tens of millions of state workers lost their jobs. He praised the progress made so far in merging firms in the oil, banking, telecom, shipping and railway sectors. The government will continue to implement a plan to cut excess capacity and shut loss-making firms. The reorganization of SOEs, given how sprawling and bloated some are, will probably entail at least some redundancies. The human resources minister told reporters last week that China will offer assistance to people who lost their jobs in the government's drive to cut excess capacity, and also recently said about 1.8 million steel and coal workers will be laid off. A state-owned mining group recently laid off 22,500 workers, and others including China Minmetals are also under pressure to cut jobs. It remains unclear where exactly the 10 million new jobs promised by the NPC plan to be created this year will come from.

More FDI encouraged in manufacturing and service

China's minister of commerce Gao Hucheng said that foreign investors' access to service and high-end manufacturing sectors will be further eased. Finance, education, culture and logistics sectors will be opened wider to foreign capital and restrictions will be relaxed, as an increasing number of foreign investors shift their focus to high-tech manufacturing in particular. China's central and western regions will be a key focus of the Belt and Road initiative, as only 16% of foreign investment in 2015 went to these areas, Gao said. Sectors like education and culture appear unlikely to be inviting for foreign companies. China would probably do well to lower restrictions in areas that many foreign companies are shifting toward, like high-tech manufacturing, as the slowdown has led many to pack up and head for cheaper places like Vietnam for factories. Rolling out more incentives and reducing administrative barriers–and most importantly, implementing these changes consistently–could quicken China's pace of enhancing these industries.

In the news: China's leaders pledge to stabilize the economy, better handle foreign disputes, avoid layoffs in SOE reform and encourage more FDI in certain sectors

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