Top U.S. official says more work needed on China investment rules

Mon Jun 20, 2016 9:07pm EDT
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By Koh Gui Qing and Greg Roumeliotis

WASHINGTON (Reuters) - China's latest proposed list of industries that would be off-limits to foreign investors shows more work is needed to agree on a new investment treaty with the United States, U.S. Commerce Secretary Penny Pritzker said in an interview on Monday.

Reaching an agreement over the so-called 'negative list' of businesses in China that are out of bounds to foreign investors is crucial in sealing a treaty between Beijing and Washington that would lift investment flows between the world’s two largest economies.

The issue has been made more prominent by a wave of Chinese acquisitions of U.S. companies that have raised questions over the inability of U.S. companies to buy assets as freely in China.

In less than six months of 2016, China's appetite for overseas acquisitions has already outgrown last year's record, as deal-hungry mainland buyers chase global assets such as real estate, chemicals and high-end technology.

Chinese negotiators sent the latest revised draft of the negative list to their U.S. counterparts last week.  U.S. officials have said in the past that the number of sectors on the list that are closed to foreigners needed to be greatly reduced for an investment deal, also known as the Bilateral Investment Treaty, to be reached.

"We are evaluating the list that we have been given (by our Chinese counterparts) and there is more work to be done," Pritzker told Reuters on the sidelines of an investment summit in Washington DC, declining to comment on whether an investment treaty can be signed before November, as some have hoped.

"We are not going to lower the standards of our typical bilateral investment treaty just to make a deal," she said, adding that a review of China’s trade status as a non-market economy - defined as one controlled by the state - will be driven by U.S. laws.

The latest negative list submitted by Chinese negotiators has not been made public, although sources told Reuters previously that the number of items on the list in earlier drafts had fallen to between 35 and 40, from around 80 previously.    Continued...

U.S. Commerce Secretary Penny Pritzker makes a speech at Microsoft China Center in Beijing April 14, 2015. Pritzker is leading a U.S. business delegation on a trade mission to China.   REUTERS/Kim Kyung-Hoon