More Measures to Attract Foreign Investment

The Chinese government will take more measures to attract foreign investments in the year of 2010.

At the end of 2009, the Chinese government declared that five measures would be adopted to attract foreign investments in 2010. In addition, the government required to deepen the reform to foreign investment management, to comprehensively deal with the approvals of foreign investment projects, to minimize the scope of examinations and approvals and to make the procedure more transparent.

Five Measures to Attract Foreign Investments

The policy of attracting foreign investments in 2010 focuses on optimizing foreign capital utilization structure, persuading the foreign investors to transfer their investments into the middle and western part of China, diversifying the measures of utilizing the foreign investments and deepening the reform to the foreign investment management and consummating the foreign exchange administration system.

The first measure is about optimizing the foreign capital utilization structure. The government will modify the Foreign Investment Industrial Guidance Catalogue. More fields will be opened to the foreign investments and the foreign investments are encouraged to invest in the high-end manufacturing, hi-tech industry, modern service, new energy, energy saving and environmental protection. The measures of Industrial Restructuring and Revitalization Plans are also applicable for the qualified foreign investors. The foreign enterprises featured with intensive land using will enjoy the preferences in getting land using rights.

The second one is to encourage the foreign investors to put more money in the middle and western part of China. The foreign investors are encouraged to set up the labor intensive enterprises meeting the environmental protection requirements in these places and they will enjoy the capital and technological support.

The third one is about the diversification of foreign capital utilization. The foreign capital will be allowed and encouraged to attend the reconstructions and restructurings of state-owned enterprises through mergers and acquisitions. In addition, measures will be taken to promote the construction of foreign-funded guarantee companies for small- and medium-sized enterprises (SMEs), to enlarge the financing channels for foreign investors and to make financial institutions give more credit support to the foreign investors.

The fourth one is to deepen the reform to foreign investments management, which requires comprehensive clearance of the approvals of foreign investment projects and the minimization of foreign investment examination and approval scope.

The fifth one focuses on creating good investment environment. More specifications and incentives will be seen in the development of open economic zones. Accelerations will happen to the constructions of economic cooperation zones. The management system for foreign exchange will be bettered and the procedures of foreign exchange principal settlement will be simplified.

Positive Signals Disclosed

It was known that China’s actually used foreign direct investment fell for several consecutive months in 2009 due to the financial crisis. Huo Jianguo, head of the Chinese Academy of International Trade and Economic Cooperation, said that China’s foreign trade and foreign investments all saw great fall in 2009 and the consecutive fall of foreign direct investment impaired its driving force for domestic investments.

In his opinion, the Chinese State Council, or Cabinet, gave out a positive signal: to use more foreign capital is an important part of increasing investments and a great force for China’s increasing domestic demand. The government encourages the foreign enterprises to attend the restructurings of stat-owned enterprises through mergers and acquisitions, which complies with the foreign investment trend. Actually, half of the foreign investments in today’s world are realized through mergers and acquisitions.

Furthermore, Huo Jianguo thought that the five measures would work to attract the foreign investments. It is also a result of the government’s feeling of the stress when Vietnam and India took measures to attract more investments.

In truth, China began to attach importance to attracting foreign investments from the 1990s. But China still needs to further increase its appeal for foreign investors. Ma Yu, director of foreign capital department, Chinese Academy of International Trade and Economic Cooperation, said that China would issue detailed measures to attract foreign capital. Presently China’s investment market is not open enough. Many key fields are not accessible for the foreign investors, making it hard for China to improve the amount and quality of foreign investments. He thought that China now lacks the new breaking points in the market. No real market measures have been used to improve the foreign capital utilization structure. For example, there are not enough measures to facilitate the approvals of foreign investment projects.

In addition, due to the limitation on foreign capital management and the unstable policies, the foreign investors are hesitant in putting their money in China. Ma Yu said that to improve the return on investment and the investment environment in the middle and western China will attract more foreign investments in these places.