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China: Between Opening up Its Financial Sector and Holding on to Its Key Economic Sectors

Until recently, foreign companies had been restricted from autonomously and freely operating in the Chinese market due to the strict requirement by China’s government for full Chinese ownership and leadership in the country’s key economic sectors: telecommunications, railways, finance, aerospace among others. For foreign companies that operate in one of these sectors, partnering with Chinese state-owned enterprises had always been compulsory, as they dominate these key sectors. A partnership between private Chinese and foreign companies also exits and is often motivated by learning, combining available funds and expertise to develop individual or joint projects, joint-venturing and so on.

China’s central government policy to control and plan the country’s economy has always made it hard for foreign companies to venture into the Chinese market. In 2006, China’s government, through the State Assets Supervision and Administration Commission (SASAC), defined key national sectors to be strictly controlled by the state. Public ownership with state capital is essential in order to fully control these sectors. Such a policy has enabled the flow of more capital into state-owned enterprises, the development of these sectors, innovation, and access to foreign markets. In addition, gaining know-how, and increasing access to foreign expertise and overseas markets have always been strategies for Chinese companies’ partnership with foreign companies.

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