For­eign in­vest­ment ceil­ing lim­its not to rise in China

Iran Daily - - Global Economy -

China has cut the stop list for for­eign in­vest­ment and in­creased the max­i­mum al­lowed share of for­eign cap­i­tal in sec­tors where in­vest­ment has al­ready been al­lowed.

In China, there are now only 33 sec­tors that for­eign cap­i­tal is banned from work­ing in, in­stead of 40. For some sec­tors, the re­stric­tions have been fully lifted, sput­ re­ported.

China has pledged to sig­nif­i­cantly in­crease the ac­cess of for­eign cap­i­tal to the do­mes­tic mar­ket by 2021. How­ever, Beijing has de­cided to im­ple­ment some of its plans ahead of sched­ule.

Ac­cord­ing to China’s Na­tional De­vel­op­ment and Re­form Com­mis­sion, re­stric­tions on for­eign cap­i­tal shares for the bank­ing, in­sur­ance sec­tor and bro­ker­age ser­vices will be abol­ished in July this year. Pre­vi­ously, there were lim­its of 51 per­cent for for­eign par­tic­i­pa­tion. Some for­eign fi­nan­cial com­pa­nies have al­ready ap­plied for full con­trol over joint ven­tures in China. In par­tic­u­lar, JP Mor­gan was the first com­pany to re­ceive per­mis­sion to trans­fer its busi­ness in China un­der its full con­trol. Other ma­jor global play­ers — UBS Group AG, No­mura Hold­ings Inc. and Credit Su­isse — fol­lowed suit, as they ap­plied to ex­pand their stakes in their joint ven­tures with China.

China will pre­ma­turely re­duce re­stric­tions on the ac­cess of for­eign cap­i­tal to the do­mes­tic mar­ket, said Li Ke­qiang, Premier of the State Coun­cil of China, dur­ing last year’s eco­nomic fo­rum in Dalian, also known as “Sum­mer Davos”. The same year, China adopted the For­eign In­vest­ment Law (FIL), which ex­pands the ac­cess of for­eign cap­i­tal to the Chi­nese mar­ket and bal­ances the rights of for­eign and lo­cal com­pa­nies. More­over, at that time, a short truce was reached in the trade war be­tween China and the United States af­ter ne­go­ti­a­tions be­tween the lead­ers of the two coun­tries in Os­aka.

To­day, de­spite a new round of es­ca­la­tion of re­la­tions be­tween China and the US — in new re­al­i­ties, claims by Wash­ing­ton of steal­ing Amer­i­can tech­nol­ogy and un­fair trade pol­icy by China have been added to the ac­cu­sa­tions of con­ceal­ing data on coro­n­avirus spread­ing — China has still de­cided to pur­sue do­mes­tic mar­ket lib­er­al­iza­tion. The up­dated stop-list for for­eign in­vest­ment has been re­duced to 33 in­dus­tries. Now for­eign busi­nesses can in­vest in gas and heat pipe­line in­fra­struc­ture in cities with a pop­u­la­tion of over 500,000 peo­ple, in the pro­cess­ing of ra­dioac­tive ma­te­ri­als and nu­clear fuel, and in tra­di­tional Chi­nese medicine. Fur­ther­more, from now on the for­eign in­vest­ment ceil­ing limit has been in­creased to 66 per­cent in such ar­eas as wheat breed­ing and seed pro­duc­tion.

De­spite the clear trend of de-glob­al­iza­tion in some Western coun­tries, as well as the de­cline in global in­vest­ment ac­tiv­ity caused by the slow­down of economies due to COVID-19, China, on the con­trary, is seek­ing to at­tract more for­eign in­vest­ment. Ac­cord­ing to Rhodium

Group, the num­ber of M&A deals by for­eign com­pa­nies of Chi­nese part­ners has in­creased sharply in the last 18 months. The ma­jor ac­tiv­ity is car­ried out by Amer­i­can and Euro­pean com­pa­nies. For ex­am­ple, Volk­swa­gen ac­quired con­trol over An­hui Jianghuai Au­to­mo­tive for $1.1 bil­lion. More­over, the Ger­man car­maker bought a 26 per­cent stake in the Chi­nese man­u­fac­turer of bat­ter­ies for elec­tric cars Guox­uan High-tech for $1.2 bil­lion.

Since an im­por­tant driver of China’s eco­nomic growth — ex­ports — is cur­rently ex­pe­ri­enc­ing bad times, China is boost­ing the other two main sources of growth — do­mes­tic con­sump­tion and in­vest­ment. To stim­u­late do­mes­tic con­sump­tion this year, the coun­try’s au­thor­i­ties have set a goal to com­pletely get rid of poverty and main­tain sta­ble em­ploy­ment. And the best way to stim­u­late in­vest­ment is to in­crease fur­ther open­ness and trans­parency of its own mar­ket. Faced with global un­cer­tainty, for­eign busi­nesses are look­ing for a “safe haven” to in­vest in, which China can be­come. Govern­ment sup­port mea­sures for the econ­omy and busi­ness con­trib­ute to in­vestor con­fi­dence in the prospects for a rapid re­cov­ery of China af­ter the new cri­sis. And this con­fi­dence is con­firmed by prac­tice: For­eign in­vest­ment in China has grown by 7.5 per­cent in the last 18 months.


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