China, US investment talks called top priority

Bilateral treaty an 'important' opportunity

China and the United States should accelerate talks on a bilateral investment treaty and finalize the pact this year to unleash investment potential, experts said.

"Finalizing a meaningful BIT should be a top priority for both governments in 2014," said the US-China Business Council Board of Directors' Statement of Priorities in the US-China Commercial Relationship.

Reuters quoted the head of the council's board, John Frisbie, as saying on Monday that "it's very important for us to grasp this opportunity to try to move forward and see how serious they are".

China and the US began discussing the treaty in 2008, but talks stalled with China's insistence on a long list of protections for some sectors.

Officials of the world's two biggest economies agreed in July to restart negotiations for a pact that incorporates national treatment for both new and existing investments.

The pact will also have a "negative list" covering all investments except those specifically excluded.

The 11th Sino-US Round of Negotiations for the treaty was held in Shanghai from Jan 14-15. The negotiators agreed on procedures and methods for future discussions.

"It is important for China to take proactive steps to reduce investment barriers in the near term, even while the two sides are negotiating a BIT. Reducing ownership restrictions upfront and demonstrating a commitment to treat domestic and foreign investors equally will build strong support in the United States for a BIT," said the USCBC statement.

Li Guanghui, vice-president of the Chinese Academy of International Trade and Economic Cooperation (a think tank of the Ministry of Commerce), said: "It's possible to conclude the talks before the end of this year. But that's not for sure.

"The major challenge is that China is uncertain about the consequences from the 'negative list' or the results from opening the restricted sectors," Li added.

The USCBC statement said that China maintains foreign ownership restrictions in nearly 100 manufacturing and service sector categories.

It said that key sectors in which foreign ownership restrictions need to be reduced include agriculture and food, vehicles, financial services, cloud computing, data centers, health insurance and hospitals, energy exploration and development, refining and petrochemicals, audiovisual and other media industries, and energy-intensive industries.

"The pace of negotiations for the China-US investment pact should be accelerated. Promoting two-way investment is now the key issue in enhancing Sino-US economic ties", said Ge Shunqi, deputy head of the Institute of International Economics at Nankai University in Tianjin.

He said the key issue is the "negative list", and the progress of negotiations will be decided partly by the country's determination to really open up various domestic sectors.

He said China should emphasize cross-border mergers and acquisitions, dramatically open the service sector to sustain inward investment and update policies covering foreign direct investment.

China's new leaders unveiled the China (Shanghai) Pilot Free Trade Zone in August, adopting the "negative list" system for the first time. The use of that system has been seen as a preliminary move in negotiations for investment pacts with the US and the European Union.

Sino-US bilateral investment is a mere fraction of the scale of two-way trade.

In 2013, US non-financial investment in China was $3.35 billion, accounting for about 2.85 percent of China's total.

China's outward direct investment in the US hit $4.23 billion last year, or 4.69 percent of China's overall non-financial ODI, according to the Ministry of Commerce.

Bilateral merchandise trade in 2013 stood at $521 billion, about 12.5 percent of China's total trade.

Frisbie said that the new US ambassador to China - Max Baucus - is well-placed to stress the need to open up to more investment.