China Perspectives - President Xi's Keynote Speech at the Boao Forum 2018

1. China Perspectives
No surprises with President Xi’s Boao opening-up measures,
quick action needed to make an impact
Looking back at President Xi’s Keynote Speech at the Boao Forum for Asia 2018
April 13, 2018

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On April 10, Chinese President Xi Jinping delivered a keynote speech at the opening ceremony of
the Boao Forum for Asia 2018, held in south China’s Hainan Province. Boao has been characterized
as “China’s Davos” bringing together as it does state leaders, global executives and thought leaders
to discuss regional and global development dynamics.
This speech comes amid escalating trade tensions between China and the US - as the world's two
largest economies take turns in announcing trade measures against each other. In this long-
anticipated speech, Xi delivered a four-point plan to further open-up the Chinese economy. This was
seen as an attempt to demonstrate that China is open and market oriented in contrast to the
allegations made against it by President Trump of the US and relevant US trade officials. The key
measures included improving market access and the investment environment, strengthening
enforcement of intellectual property rights, and reducing import tariffs. The main points of this plan
are introduced below.
Field of
measures
Specific measures
Market
access
Financial
Remove caps on foreign ownership in Chinese banking, securities and
insurance institutions.
Manufacturing
Remove 50% cap on foreign ownership of joint ventures in autos, ships
and aircrafts, particularly autos.
Negative list
Revise the negative list on foreign investment in the first half of 2018
and ensure pre-establishment national treatment plus negative list in
place.
Investment
environment
Governance
Institutional reform to centralize market supervision and improve
efficiency and overall consistency, such as through the establishment
of the State Administration for Market Regulation.
Intellectual
property
Governance Reorganize the State Intellectual Property Office.
Law
enforcement
Enhance IPR law enforcement.
Import
Tariffs
Significantly reduce auto import tariffs and lower tariffs for some
products with strong domestic needs.
Government
procurement
Accelerate China’s accession to the WTO Government Procurement
Agreement (GPA).
Trade show
Hold the first China International Import Expo in Shanghai on
November 5-10 this year.
Chinese media hailed Xi’s speech as a “strong voice of reform and opening up” and Xi clearly
emphasized his intention that these measures be implemented as soon as possible. However, most
of the announced measures are reiteration of past commitments or promises and the timeline for
implementation remains unclear in many instances. The foreign business community have called for
clarity regarding the implementation details and timelines.
On April 11, Chinese central bank governor Yi Gang announced a slew of detailed measures as a

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follow-up to Xi’s announcement on further opening up of the country’s financial market. The State
Council executive meeting chaired by Premier Li Keqiang on April 12 also put forward several
opening up measures related to pharmaceuticals. Below is a summary of these measures and their
implementation date.
Field of
measures
Specific measures
Implementation
date
Financial
Remove foreign investment limits on banks and financial asset
management companies.
By end-June
Ease the limit on foreign equity stakes to 51% for securities, fund
management, futures and life insurance companies, with all limits
being removed beyond three years.
Eliminate the requirement of at least one local securities company
in establishing joint-stock securities companies.
Expand the current daily quota for Shanghai-Hong Kong Stock
Connect flows by four times.
Access to the insurance agency and other insurance businesses for
qualified foreign investors.
Allow foreign insurance companies the same business scope as
local companies.
Encourage foreign investment in the trust, financial leasing, auto
financing, consumer financing and other banking financial
services.
By end of year
Remove foreign investment limits on financial asset investment
companies and wealth management companies that are newly
established by commercial banks.
Significantly broaden the business scope of foreign banks.
Allow the same business scope for joint-stock securities companies
as local counterparts.
Remove the requirement to have a two-year presence of a
representative office before establishing foreign insurance
companies.
Tariffs Remove tariffs on imported cancer drugs. From May 1
Intellectual
property
Up to 6 years of data protection period for new original chemical
drugs, within which no approval for applications to market drugs
of the same kind; Patent term extension up to 5 years for new
original drugs filed simultaneously in China and abroad.
N. A
Considerations and recommendations
Xi’s high-profile speech and commitments at Boao should accelerate and enhance the effectiveness
of opening up and reform measures in China.
The risk of US-China trade war may pressure China to accelerate its action. Xi’s four-point plan in

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fact addressed some key demands from the US, such as in relation to reciprocal tariffs and the theft
of intellectual property. President Trump complained recently about China's 25% import duty on
foreign cars, which is much higher than the 2.5% auto tariff of the US. The promise of significantly
reducing tariffs on imported cars is also great news for the European Union (particularly if the trade
war with the US continues).
The reference by President Xi to the proactive establishment of the super State Administration for
Market Regulation (SAMR) is also encouraging. This could be a move addressing complaints about
the bureaucracy of the former State Administration of Industry and Commerce (SAIC) by foreign
investors. That said, the efficiency of the new organization remains to be seen. The former head of
the SAIC has been named to lead the new SAMR.
In the forthcoming months, foreign companies are advised to closely watch developments and
consider engagement with governmental stakeholders as appropriate. Following are a range of
potential areas for monitoring and engagement:
China claimed that 65% restrictions have been removed in its negative list for foreign
investment in the past three years. Engagement directly, or through chambers of commerce
with the National Development and Reform Commission (NDRC) and Ministry of Commerce
(MOFCOM) may facilitate the current revision of the list should current limitation to business
development be a concern.
Chinese government procurement markets are huge and of great potential. The accession of
China into GPA will help build “open, fair and transparent conditions of competition”, and could
open up significant contract opportunities to foreign suppliers. China began its attempt to join
the GPA in 2007, and has to negotiate with current agreement members to reach a consensus
among them. Companies should consider engaging directly or through an industry trade
association with their home country government to explore approaches to support common
business interests as to China’s concessions in the foreseeable future.
The fourth amendment of China’s Patent Law started in 2014, but has been slow, and
controversial as to some proposed amendments. The recent measures on the implementation
of patent term extension and patent linkage make pressing the incorporation of these
development into the legislation. Comments on the revision should be provided to the Ministry
of Justice (the former State Council Legislative Affairs Office now part of the ministry) before
the final review by the Committee on Constitution and Law of the National People’s Congress.
This should be done on a timely basis.
The China International Import Expo has been billed as a landmark initiative with backing from
the highest levels of the Chinese government. Due consideration should be given to this event
where “150,000 domestic and foreign professional purchasers” are expected to participate, and
a major trade forum will take place.
US companies should also be alert to potential measures and other actions that might be

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intended to prompt them to help lobby the US government to reduce or eliminate threatened
tariffs. They would need to respond very carefully in such situations – balancing the interests
and expectations of both US and Chinese stakeholders – and navigating relevant political
sensitivities and risks.

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