Creating a Better Environment For Foreign Investment

By Zhou Mi

Opening markets to foreign investment has long been a cornerstone of China’s opening-up policy. Both China’s economy and foreign companies have achieved significant development over the past decades.

At the beginning of 2017, with trade protectionism casting a shadow on the global economy, Chinese President Xi Jinping made a pledge in his speech at the World Economic Forum in Davos, Switzerland, that China would always be open to the world.

During the first seven months of this year, foreign investment in China decreased 1.2 percent year on year. The State Council, China’s cabinet, in mid-August announced new policies in five areas to enhance investors’ confidence and improve the business environment.

China has huge markets and a comprehensive industrial structure, which greatly appeal to foreign investors. After years of efforts, China now has strong industrial competitiveness in international markets.

Further expanding market access will attract more foreign investment and create new demand. China will adopt a policy that combines national treatment with a negative list. Such a policy has long been used in many developed economies. While opening markets to foreign capital, it also helps reduce administrative costs significantly.

In pursuit of innovative, coordinated, open, green and inclusive development, the Chinese Government will promote foreign investment in a number of key industrial sectors. This measure will help accelerate economic restructuring and upgrading as well as realize sustainable growth.

Fiscal policy is an important lever for macroeconomic control and social wealth distribution. It also has a big influence on company behavior. When making new fiscal policy to promote foreign investment, the government should learn from experience and maintain balance in giving foreign investors national treatment. Foreign investment in different sectors is sensitive in responding to tax policies. With preferential tax policies, such as postponing tax payments, the government can encourage foreign investment in specific projects or sectors, especially the hi-tech and high value-added services sectors. Multinational companies should be encouraged to set up regional headquarters in China, and invest in the less developed west and former heavy industry base in northeast China as well as in infrastructure construction and important projects.

As frontiers to facilitate China’s opening up to foreign