The view from China

A ‘quiet’ August?

August is traditionally a ‘quiet’ month with much of Europe on holiday and other western nations and their various institutions taking time off.

And China’s elite leadership are also taking time away from the rigours of running the world’s second largest economy and relaxing in time honoured tradition in the seaside resort of Beidiahe, some 350 km east of the capital.

Regulatory challenges

However, August has been anything but quiet for China’s tech and private sectors. Successive regulatory crackdowns have not only wiped billions from the fortunes of Tencent, Pinduoduo and Alibaba’s founders, but also sent shockwaves around the world as foreign investors re-assess their exposure to the China market.

Indeed, earlier in the week China released a five-year plan that will further strengthen regulatory control in strategic sectors such as tech and healthcare.

US-China relations

We also saw the publication of the US China Business Council’s (USCBC) annual China member survey which highlighted the pressure that geopolitical tensions are having on US enterprises in addition to the ‘unlevel playing field’ that they must contend with in-market.

That said US business remains largely profitable in China and some 40% are committed to increasing their local footprint. However, if the policy and broader business environment does not improve then US enterprises will no longer prioritise the China market for future growth and investment.

Lack of clarity round border control

The CBI remains concerned at the lack of clarity in China regarding border re-openings, dependants’ and business visa application procedures and continues to lobby for the recommencement of direct flights between the UK and China.

BA announced recently that it will be back to 10 flights per week between London and Hong Kong, however unfortunately there is no sign of direct flights to mainland China.

These issues have been raised with the Chinese authorities both in China and the UK and next week there will be further discussions and plans for further advocacy in partnership with our counterparts at DIT, the British Chambers in China and the CBBC (China-Britain Business Council).

Looking beyond China

Looking beyond China to the broader NE Asian and ASEAN region, we have had strong engagement with our counterparts in Japan and Korea regarding COP15 and B7 follow ups on biodiversity principles.

The CBI has also been active across the ASEAN region, attending webinars, events and calls relating to Vietnam’s Free Trade Agreement (FTA), Indonesian green finance initiatives and deepening partnerships with DIT’s teams in Manila, Jakarta and Singapore.

The view from the USA

CBI engagement in Texas and California

As part of the CBI’s work engaging state governments in the US on trade and investment policy, the CBI Washington team travelled to Texas and California in early August to deliver CBI messages about UK leadership in the upcoming COP26 climate change summit.

With Texas standing as one of the most dynamic economies in the US, the purpose of the visit was to gain a clearer understanding of how foreign investment is flowing into the state, how the UK is performing relative to its competitors, and where there might be opportunities to collaborate with local officials. The team met first with officials in the Texas State Legislature and Texas Governor’s Office in Austin and then went southward to Houston to see the Greater Houston Partnership business association and the British Consul-General for the state of Texas.

In California, CBI Head of Washington John Dickerman met with California government and business stakeholders in San Francisco to pitch the upcoming COP26 and UK Investor Show summits on the back of a successful visit from Secretary of State for International Trade Liz Truss in late July.

UK-US collaboration

Back in the nation’s capital, the CBI Washington team has been collaborating with the British government’s international trade network across the US to align strategies on lobbying, engagement, and policy development for the rest of 2021. Senior Policy Advisor John Bleed represented the CBI at a private roundtable on 27 July at the British Embassy to discuss how the CBI and DIT can work together in this regard.

Infrastructure investment

The Washington office has also been closely following the development of the $1.2tn bipartisan infrastructure package moving through the US Congress, a monumental policy achievement for the Biden Administration. Both parties have long acknowledged that much of America’s highways, bridges, railways, airports, and ports are in desperate need of repair, and this bill represents the largest injection of federal money towards the issue since the interstate highway system was built in the 1950s.

Some of the components include:

• $110bn for the construction and repair of bridges and highways
• $39bn for public transportation initiatives
• $66bn for improving passenger and freight railways
• $15bn to promote green transit, such as charging stations for electric vehicles and enabling governments to purchase low-emission busses and ferries
• $66bn for the electrical grid and $55bn for improving waterways and pipelines
• $17bn for ports and $25bn for airports to address construction backlogs
• $65bn specifically for rural broadband investment for lower income and rural households.

What does this mean for CBI members?

CBI members should take note that the infrastructure package also includes over 50 pages of ‘Buy American’ provisions – which dictate the thresholds of materials, components, and workers originating in the US that need to be used in federally-funded infrastructure programs. This provides a potential challenge to capable UK firms interested in getting involved in the wave of investment in the construction of these projects (although it does not close the door to opportunity). The CBI Washington team is closely monitoring the situation.