The People’s Republic of China (PRC) is the top global Foreign Direct Investment (FDI) destination after the United States due to its large consumer base and integrated supply chains. In 2019, China made some modest openings in the financial sector and passed key pieces of legislation, including a new Foreign Investment Law (FIL). China remains, however, a relatively restrictive investment environment for foreign investors due to restrictions in key economic sectors. Obstacles to investment include ownership caps and requirements to form joint venture partnerships with local Chinese firms, industrial policies such as Made in China 2025 (MIC 2025), as well as pressures on U.S. firms to transfer technology as a prerequisite to gaining market access. These restrictions shield Chinese enterprises – especially state-owned enterprises (SOEs) and other enterprises deemed “national champions” – from competition with foreign companies.
The Chinese Communist Party (CCP) in 2019 marked the 70th anniversary of its rule, amidst a wave of Hong Kong protests and international concerns regarding forced labor camps in Xinjiang. Since the CCP 19th Party Congress in 2017, CCP leadership has underscored Chairman Xi Jinping’s leadership and expanded the role of the party in all facets of Chinese life: cultural, social, military, and economic. An increasingly assertive CCP has caused concern among the foreign business community about the ability of future foreign investors to make decisions based on commercial and profit considerations, rather than CCP political dictates.
Key investment announcements and new developments in 2019 included:
On March 17, 2019, the National People’s Congress passed the new FIL that effectively replaced previous laws governing foreign investment.
On June 30, 2019, the National Development and Reform Commission (NDRC) and Ministry of Commerce (MOFCOM) jointly announced the release of China’s three “lists” to guide FDI. Two “negative lists” identify the industries and economic sectors from which foreign investment is restricted or prohibited based on location, and the third list identifies sectors in which foreign investments are encouraged. In 2019, some substantial openings were made in China’s financial services sector.
The State Council also approved the Regulation on Optimizing the Business Environment and Opinions on Further Improving the Utilization of Foreign Investment, which were intended to assuage foreign investors’ mounting concerns with the pace of economic reforms.
While Chinese pronouncements of greater market access and fair treatment of foreign investment are welcome, details and effective implementation are needed to improve the investment environment and restore investors’ confidence. As China’s economic growth continues to slow, officially declining to 6.1% in 2019 – the slowest growth rate in nearly three decades – the CCP will need to deepen its economic reforms and implementation. Moreover, the emergence of the Coronavirus (COVID-19) pandemic in Wuhan, China in December 2019, will place further strain on China’s economic growth and global supply chains.
Table 1: Key Metrics and Rankings
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Website Address
Transparency International’s Corruption Perceptions Index
Kenya has a positive investment climate that has made it attractive to international firms seeking a location for regional or pan-African operations. The novel coronavirus pandemic has affected the short-term economic outlook, but the country remains resilient in addressing the health and economic challenges. In July 2020 the U.S. and Kenya launched negotiations for a Free Trade Agreement, the first in sub-Saharan Africa. In the World Bank’s 2020 Doing Business report Kenya improved 7 places, ranking 56 of 190 economies reviewed. In the last three years, it has moved up 54 places on this index. Year-on-year, Kenya continues to improve its regulatory framework and its attractiveness as a destination for foreign direct investment. Despite this progress in the ease of doing business rankings, U.S. businesses operating in Kenya still face aggressive tax collection attempts and significant bureaucratic processes and delays in issuing necessary business licenses. Corruption remains endemic and Transparency International’s (TI) 2019 Global Corruption Perception Index ranked Kenya 137 out of 198 countries, worsening by seven spots compared to 2018.
Kenya has strong telecommunications infrastructure, a robust financial sector, a developed logistics hub, and extensive aviation connections throughout Africa, Europe, and Asia. In 2018, Kenya Airways initiated direct flights to New York City in the United States. Mombasa Port is the gateway for most of the East African trade. Kenya’s membership in the East African Community (EAC), the Africa Continental Free Trade Area (AfCFTA), and other regional trade blocs provides growing access to larger regional markets.
In 2017 and 2018 Kenya instituted broad reforms to improve its business environment, including passage of the Tax Laws (amended) Bill (2018) and the Finance Act (2018), establishing new procedures and provisions relating to taxes, simplifying registration procedures for small businesses, reducing the cost of construction permits, easing the payment of taxes through the iTax platform, and establishing a single window system to speed movement of goods across borders. But the Finance Act 2019 introduced taxes to non-resident ship owners, and the Finance Act 2020 enacted a 1.5 percent Digital Service Tax (DST), which will be implemented in January 2021. The oscillation between business reforms and conflicting taxation policies has raised uncertainty over the Government of Kenya’s (GOK) long term plans for improving the investment climate.
Kenya’s macroeconomic fundamentals remain among the strongest in Africa, with five to six percent GDP growth over the past five years, six to eight percent inflation, improving infrastructure, and strong consumer demand from a growing middle class. However, GDP growth is projected to slow to 1.5-2.0 percent in 2020 due to COVID-19. The GOK has responded by loosening fiscal policies like corporate income tax and other measures to cushion companies and individuals. There is relative political stability due to the Building Bridges Initiative (BBI) and President Kenyatta has remained focused on his second term “Big Four” development agenda, seeking to provide universal healthcare coverage; establish national food security; build 500,000 affordable new homes; and increase employment by doubling the manufacturing sector’s share of the economy.
The World Bank’s annual Kenya Economic Update, released in April 2020, cites some short term economic risks to Kenya’s continued growth such as the locust invasion, COVID-19 pandemic, and flooding, but also noted positive developments including measures taken by the GOK and the Central Bank of Kenya to reduce the impacts of these risks. American companies continue to show strong interest to establish or expand their business presence and engagement in Kenya, especially following President Kenyatta’s August 2018 and February 2020 meetings with President Trump in Washington, D.C. Sectors offering the most opportunities for investors include: agro-processing, financial services, energy, extractives, transportation, infrastructure, retail, restaurants, technology, health care, and mobile banking.
Macau became a Special Administrative Region (SAR) of the People’s Republic of China (PRC) on December 20, 1999. Macau’s status since reverting to Chinese sovereignty is defined in the Sino-Portuguese Joint Declaration (1987) and the Basic Law. Under the concept of “one country, two systems” articulated in these documents, Macau enjoys a high degree of autonomy in economic matters, and its economic system is to remain unchanged for 50 years following the 1999 reversion to Chinese sovereignty. The Government of Macau (GOM) maintains a transparent, non-discriminatory, and free-market economy. The GOM is committed to maintaining an investor-friendly environment.
In 2002, the GOM ended a long-standing gaming monopoly, awarding two gaming concessions and one sub-concession to consortia with U.S. interests. This opening encouraged substantial U.S. investment in casinos and hotels and has spurred rapid economic growth.
Macau is today the biggest gaming center in the world, having surpassed Las Vegas in terms of gambling revenue. U.S. investment over the past decade is estimated to exceed USD 23.8 billion. In addition to gaming, Macau hopes to position itself as a regional center for incentive travel, conventions, and tourism, though to date it has experienced limited success in diversifying its economy. In 2007, business leaders founded the American Chamber of Commerce of Macau.
Macau also seeks to become a “commercial and trade cooperation service platform” between mainland China and Portuguese-speaking countries. The GOM has various policies to promote these efforts and to create business opportunities for domestic and foreign investors.
In September 2016, the GOM announced its first Five-Year Development Plan (2016-2020). Highlights include establishing a trade cooperation service platform between mainland China and Portuguese-speaking countries, improving the structure of industries, increasing the quality of life, protecting the environment, and strengthening government efficiency.