Setting a new course for the economy
After blazing a new trail in high-quality development, China is pressing ahead with its next phase of openingup by widening investment options for foreign investors.
That from analysts’ perspective augurs with policymakers’ efforts to steer the economy to high-quality growth and focus on sharing development opportunities with the rest of the world. In other words, the world’s second largest economy will look to actively promote foreign investment and keep fine-tuning the domestic business landscape, despite global uncertainties and headwinds, they said.
The comments also come at a time when China is planning to introduce a streamlined foreign investment law, which seeks to provide fair and equal treatment to foreign and domestic companies, and promote the further opening of the domestic market.
After four decades of reform and opening-up, China has shifted away from high-speed growth to high-quality long-term development, said Zhang Yansheng, a senior researcher with the Beijing-based China Center for International Economic Exchanges.
“Looking ahead, the country will not only further open up to import more goods and services, but also open itself more to the outside world to learn from advanced rules and institutions,” Zhang said.
“Learning from advanced institutions would include topics like macroeconomic theory to industrial economic development,” he said. Citing an example, he suggested that China should foster international cooperation to further modernize its governance capacity, he said.
Yu Guangsheng, deputy Party secretary of the Chinese Academy of International Trade and Economic Cooperation, said he expects China to open up more sectors, reduce the negative list and allow more foreign companies to build wholly owned units in China.
Negative lists identify sectors where foreign participation is restricted. It is a common practice adopted in many countries and regions to manage and streamline foreign investment.
Yu said that it is important to study the new trends of utilizing foreign capital, and to further empower foreign businesses to play an active role in advancing China’s economic prosperity and benefiting from the process.
The remarks are also in line with the economic aims espoused by the central authorities. According to a statement released after the Central Economic Work Conference in 2018, China will push forward a new pattern of all-around opening-up to pursue mutual benefits with the rest of the world. The country will increase imports and cut import tariffs on some products to promote balanced trade, the statement said.
Last year, China’s imports grew faster than exports. Data from the General Administration of Customs showed the country’s imports surged 12.9 percent to 14.09 trillion yuan ($2.1 trillion). The trade surplus continued to narrow, shrinking 18.3 percent year-on-year.
Wei Jianguo, vice-president of the China Center for International Economic Exchanges, said China will make a continued push to import more quality goods and services from the rest of the world, in order to meet ever-growing domestic demand and contribute more to the global economy.
Though increased imports may impact certain local industries, domestic companies will be motivated to deepen structural reforms, reduce operational costs and speed up innovation, Wei said.
Jim Yong Kim, the outgoing president of the World Bank Group, has praised China’s achievements in the past and is optimistic about its future outlook.
“Further opening-up will not only provide China the markets it needs, but also the technology, managerial talent, and ideas to further catch up with more advanced countries,” he said when addressing the International Forum on China’s Reform and Opening Up and Poverty Reduction recently.
“Other countries are looking to China as a source of knowledge and experience, and the World Bank Group will continue to support China’s growing international role. We will continue to cooperate on the most important global issues and learn from China’s 40 years of reform and opening-up.”
China unveiled an array of measures recently to further liberalize market access for foreign investors and fuel its opening-up drive.
A shortened foreign investment negative list was implemented in July, with the number of items down to 48 from 63 in the previous version. It conforms to high international standards.
In December, China rolled out the shortened Market Access Negative List to standardize regulations in a transparent way, to help level the playing field for foreign enterprises and private firms.
In late January, the first National Foreign Businessman Assembly was held in Beijing, gathering multinational executives and think tank research fellows. Attendees underlined China’s long-term commitment to further open up, and the essential role of foreign businesses in strengthening the Chinese economy.
Guo Zhouming, president of China Commerce Think Tank, said the nation has remained committed to the fundamental national policy of opening-up and previous examples have proved that openness brings progress.
“No country can develop itself in isolation from the rest of the world,” Guo said, adding China will open wider to the world and attract more foreign investment.
Lai Youwei, senior researcher at the Development Research Center of the State Council, considered foreign businesses a “significant force” in bolstering China’s economic development.
Lai said that in the four decades of reform and opening-up, foreign companies made about $2.1 trillion of direct investments in the Chinese mainland. They contributed to 10 percent of China’s urban jobs, 20 percent of the country’s fiscal revenue and nearly half of the trade volume.
That can also be attributed to China’s resolution and measures to continuously open up and reduce restrictions on foreign investment access, Yu said.
Also on the government’s future agenda will be efforts to create a better business environment and passing the streamlined foreign investment law, Yu said.
China’s draft foreign investment law will be submitted to the second session of the 13th National People’s Congress, which is scheduled to open in March, Xinhua News Agency reported.
Once adopted, the unified law will replace three current statutes on Chinese-foreign equity joint ventures, non-equity joint ventures and wholly foreign-owned enterprises.
Capital contribution, profits and capital gains of foreign investors in China can be freely transferred out of the country as either renminbi or in other foreign currency denominations, according to the draft law.
The foreign investment law will be a basic law in that field, and its drafting is an important move in implementing the strategy of further opening-up made by the Communist Party of China Central Committee, said the decision adopted by the 13th NPC Standing Committee.
The draft law stipulates the protection of intellectual property rights of foreign investors and companies, and encourages technological cooperation “based on a voluntary basis and business rules”.
The conditions for technological cooperation should be settled by all the investors concerned on a fair basis. Government officials cannot use administrative methods to force technology transfers, according to the draft law.
Ma Yu, a researcher at the Chinese Academy of International Trade and Economic Cooperation, said the move will help foster a more predictable and transparent business environment for global investors and safeguard their interests and rights.
He said an improved environment will fuel multinationals’ enthusiasm to establish strong cooperation with Chinese partners in regional development, technological innovation, outsourcing services and product safety.
Foreign companies operating in China, however, should adjust their strategies, as the environment both at home and abroad has undergone profound changes, said Sang Baichuan, a professor at the University of International Business and Economics in Beijing.
“China has shifted from high-speed growth to highquality development. So foreign businesses should also change their expansion plan that focuses only on ‘quantity’ to emphasize both ‘quantity and quality’,” Sang said.
He said that foreign investment must avoid creating excess capacity in China, as the country’s economic structure has been changing and competition intensifying.
Official data showed foreign direct investment into China continued a strong run in 2018, despite the downturn in global cross-border direct investment and increasingly intense global competition.
Foreign direct investment into the Chinese mainland rose 0.9 percent year-on-year to 885.61 billion yuan in 2018, according to the Ministry of Commerce.
A total of 60,533 new foreign-funded companies were established last year in China, up 69.8 percent year-onyear, data showed. During the period, FDI flowing into the traditional manufacturing sector increased 20.1 percent from a year earlier.
Inspired by the government’s efforts, foreign companies in various sectors have expressed optimism about the Chinese market. Foreign enterprises are not only participants and drivers of China’s reform and openingup, but also beneficiaries of the undertakings, said She Duanzhi, vice-president of Nike China.
Tao Lin, vice-president of Tesla Asia-Pacific, said the automaker has achieved accomplishments in China in a short period of time, and the company’s factory construction in China is faster than in other markets, thanks to the improved business environment in China and the overall industrial climate.
US-based Tesla Inc broke ground on its Shanghai plant on Jan 7, becoming the first company to benefit from a new policy allowing foreign carmakers to set up whollyowned subsidiaries in China.
James Zhan, president of Tata Group China, said: “I am very pleased that the Chinese government has repeatedly stressed that foreign companies are welcome to participate in the market.”
“An economic environment with involvement of various foreign companies is important for China’s healthier development,” Zhan said, stressing that his company remained confident on the Chinese market.
In the financial sector, China’s securities regulator approved UBS AG’s plan to gain a majority stake in its mainland securities joint venture.
This made the Swiss bank the first global financial institution to take advantage of the new rules China put in place to further open up its financial market.
According to an announcement released by UBS on Dec 24, the company raised its stake in its joint venture UBS Securities Co from 24.99 percent to 51 percent.
Sergio P Ermotti, UBS Group CEO, said this step underlines the firm’s long-term commitment to the Chinese market. “The further opening-up of China’s financial sector represents great opportunities for our wealth management, investment bank, and asset management businesses,” he said.
Eugene Qian, president of UBS Securities, said with majority control, UBS can better realize its opportunities in China’s capital markets and make a greater contribution to the UBS Group.