Date
17 October 2017
A new trade settlement between the European Union and China could herald a new era of  better relations between the mainland and its trading partners. Photo: Internet
A new trade settlement between the European Union and China could herald a new era of better relations between the mainland and its trading partners. Photo: Internet

Why Beijing is working hard to improve trade relations

Two separate reports are showing that Beijing is working hard to improve relations with its major trading partners as central leaders try to rebalance the economy and put it on a more stable long-term footing.

In a move with big implications, media reports are saying the Chinese agency that approves mergers and acquisitions is sharply reducing the time for its reviews, which is a welcome signal for companies that sometimes see their global deals delayed for months due to slow-moving Chinese regulators.

The second news bit has China and the European Union reaching a deal to end a trade spat in the telecoms equipment sector, which had seen the EU threaten to levy anti-dumping tariffs against Chinese heavyweights Huawei and ZTE (00763.HK; 000063.CN).

These two moves collectively seem to show that Beijing may be tiring of the steady stream of recent high-profile disputes with its major trading partners and wants to remove this kind of headache as it focuses on the much bigger task of rebalancing the economy.

Reducing the high levels of state support that many exporters now receive will ultimately benefit domestic players such as Huawei by forcing them to be more competitive rather than relying on handouts from Beijing.

Quicker approval of M&A deals will also eliminate a grievance among big foreign companies, which complain that slow review by China’s regulator costs them big money.

On that note, let’s look at the first of the two headlines that says that China’s Ministry of Commerce has recently taken steps to reduce its approval time for major global M&A after it started conducting reviews for major deals in 2009.

Reacting to criticism that it takes too long to approve deals that often have few implications for competition in China, the ministry rolled out a new procedure in April that fast-tracks the review process for smaller deals that are unlikely to have any big impact.

Following the introduction of that policy, the average time for approval of cases has reportedly halved.

Deals that qualified for the new fast-track approval moved forward with lightning speed, requiring an average approval time of just 26 calendar days since the change took place.

The ministry also moved to boost its transparency this month by publishing a comprehensive data set detailing transaction filings and approval dates for all major M&A.

I’ve been a frequent critic of the commerce ministry for its slowness in approving some deals, which at times can take nearly a year and sometimes carry political overtones.

The regulator often seems to favor local firms over foreign companies, slowing down or even blocking deals involving multinationals when Chinese companies complain.

This new campaign indicates that kind of politics and foot-dragging may soon disappear, although we’ll have to wait for future major deals to see how serious the ministry really is.

Next, let’s look at the other major headline that has China and the EU reaching a landmark deal that will avoid anti-dumping tariffs Europe had threatened over accusations of unfair government support for Huawei and ZTE.

Reports of this deal first emerged last week, and followed two years of complaints from the EU over unfair support for the Chinese companies in the form of policies such as state-supplied low-interest financing for foreign firms that purchased equipment from China.

Such support had helped Huawei win 25 percent of the EU telecoms equipment market, up sharply from 2.5 percent in 2006, as it stole share from local giants Ericsson, Alcatel-Lucent (ALUA.PA) and Nokia (NOK1V.HE).

Under the new agreement, China will reduce export credits to Huawei, ZTE and other equipment makers, a move that should force them to raise their prices to levels more in line with the European equipment makers.

These latest developments appear to be part of a newer attitude by Beijing which previously paid little notice to the concerns of foreign companies and governments as it focused on building up its own industries.

We’ve seen other similar signals of positive change, including an attempt at greater transparency in a recent string of antitrust investigations that appeared to target foreign multinationals.

If the trend continues, it could mark the start of a new period of a more conciliatory, cooperative stance by Beijing in its volatile trade relations with the West.

Bottom line: A new trade settlement between the EU and China, and recent steps by the M&A regulator to streamline its reviews could reflect Beijing’s attempts to launch a new era of better relations with its major trading partners.

– Contact us at [email protected]

RA

A commentator on China company news and associate professor in the journalism department of Fudan University in Shanghai. Follow him on his blog at www.youngchinabiz.com.

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