Sweeteningthepot
China announces a range of new measures to accelerate foreign direct investment
AFTER a three-decade surge of impressive growth, foreign direct investment (FDI) in China has showed definite signs of slowing down. Experts observe that this can be attributed to the profound changes that have taken place in the global industrial chain along with the challenge of China losing its competitive edge in terms of labor, land and natural resources.
Statistics from the Ministry of Commerce say China utilized 813.2 billion yuan in FDI in 2016, a year-onyear increase of 4.1 percent. However, if this amount is valued in U.S. dollars, which is $126 billion, then the inbound FDI in 2016 actually dropped from $126.2 billion in 2015, because of the devaluation of the renminbi, China’s currency.
To address these challenges and resuscitate FDI growth, China’s State Council issued a document in late January outlining 20 measures to spur foreign investment, including loosening restrictions on foreign capitals’ entry into the service, manufacturing and mining sectors. It also pledged to beef up efforts to protect intellectual property and encourage both domestic and foreign businesses to equally bid for government procurement. In addition, foreign businesses are encouraged to invest in the underdeveloped western region and revival of the northeastern provinces, China’s old heavy-industry bases that are under industrial transformation. sentiments. “It means foreign businesses in China will embrace a more open, fairer and more convenient business environment,” he said.
According to the document, China will make greater efforts in creating an environment for fair competition. All businesses registered in China, no matter foreign or domestic, are treated equally.
With a green light given to foreign capital, Chinese companies will face fiercer competition from foreign rivals. International manufacturers like Siemens, Bombardier Transportation and ABB Group are showing intentions of enlarging market shares in China.
However, challenges also breed opportunities. Bai Ming, a researcher on international markets at CAITEC, believes lifting restrictions will help optimize resources in both domestic and global markets. “Foreign capital brings in cooperation opportunities and possibilities of optimizing domestic and global resources. It helps strengthen Chinese companies’ competitiveness in the global market,” he said.
In the services sectors, restrictions on foreign businesses investing in banks, sectors of security brokerages and insurance will be loosened. Accounting, architectural design and rating services will allow foreign capital to invest. Sectors such as telecommunications, Internet and education will also be gradually opened up.
Dong Dengxin, Director of Finance and Securities Institute with Wuhan University of Science and Technology, pointed out the move will accelerate globalization of domestic financial businesses and strengthen their international competitiveness. “Although China’s state-owned banks are very big, their share on the global market is relatively small. Opening up in these sectors will accelerate steps of Chinese banks going abroad,” said Dong, adding that foreign banks will be able to enter Chinese market.