China’s use of foreign investment will be more open. On January 6th, the Ministry of Commerce and the General Administration of Customs interpreted “On Several Measures of Expanding Opening-Up and Actively Using Foreign Capital”(Hereinafter referred to as “Several Measures”) that will be published soon in the State Council Information Office. They said that China will further expand opening-up and promote fair competition between domestic and foreign investors, boost investment, and further liberalize the opening-up in finance field.

 

For the recent part of the public opinion that China’s investment opportunities and returns are reduced, Vice Minister of Commerce Wang Shouwen responded that a number of foreign chambers of commerce survey shows that foreign investors have more willingness and confidence to invest in China. Last year, the United Nations Conference on Trade and Development(UNCTAD) published “World Investment Report in 2016”, which indicated that China remained the second most popular investment destination in the world.

 

“China’s policy of reform and opening up will not change, and China will further expand opening up and join in the regional economic integration process.” Wang Shouwen specially stressed, in the next five years, China’s domestic market demand will reach 10 trillion Dollar and this demand will bring foreign investors a huge opportunity.

 

In 2016, the scale of the utilization of foreign investment in China was the same as that of the previous year

 

On January 6th, in the news conference of the State Council Information Office, Wang Shouwen said that the world economy stayed in a state of profound adjustment and it lacked the impetus for recovery in 2016, so multinational companies have weak will on investment. UNCTAD predicted that the number of direct investment may be reduced by 10% -15% in 2016 .

 

 “In this case, the overall size of China’s foreign investment is expected to be flat in 2016 and 2015.” Wang said, but China’s use of foreign capital was further optimized. Data show that from January to November 2016, the actual use of foreign investment in services is 513.3 billion yuan with year-on-year growth of 8%, which is significantly higher than the growth rate of 3.9%, the actual use of foreign investment over the same period. This proportion also reached 70.1% of the national total with an increase of 2.6 percentage points.

 

At the same time, the foreign investment that the manufacturing sector attracted declined, but that of high-tech manufacturing increased by 3.6%. Compare to this situation, the foreign investment attracted by labor-intensive general manufacturing declined, such as textile and garment industry decreased by 32.6%. In addition, the foreign investment attracted by real estate dropped by 31.1% in the first 11 months of last year, the proportion it accounting for the total foreign investment fell to 15.4%.

 

Wang Shouwen said overall, the reason why the scale of foreign investment attracted by Chinese market can remain stable, the structure can be optimized last year is mainly due to two factors. Firstly, China’s economy has a relatively good growth and China’s society is relatively stable, which providing a good investment surroundings for foreign investors. Secondly, China’s domestic market is a very large, potential market with a strong attraction.

 

 “But at the same time, we should know that China is still facing some challenges in the use of foreign capital.” Wang Shouwen said that the cost advantage of China’s domestic production factor is weakening,  and neighboring countries have introduced some preferential policies to attract foreign investment, which all intensified the competition between China other countries. What’s more, some traditionally foreign investment-oriented developed countries encouraged the manufacturing industry repatriate to their own country, and the scale of foreign investment was decreasing.

 

Wang Shouwen said that Chinese leaders have proposed on many occasions that China’s policy on utilizing foreign capital will not change, the protection of the legitimate rights and interests of foreign-invested enterprises will not change and that the direction of providing better services for enterprises who invest in China will not change.

 

The protection of intellectual property rights has achieved initial results

 

In this context, the Ministry of Commerce in conjunction with the Development and Reform Commission and other relevant departments of the State Council put forward “Several Measures” after several serious discussions. Wang Shouwen said that “Several Measures” has been examined and approved by the State Council executive meeting last month, and it will soon be officially released.

 

According to reports, “Several Measures” shows that China will substantially relax restrictions on foreign investment in the service, manufacturing and mining sector through the revision of the “Catalog for Guidance of Foreign Investment Industry” and the relevant policies and regulations. “2025” strategy of China’s policy measures should be equally applicable to domestic and foreign-funded enterprises, support foreign-funded enterprises participating in the construction of infrastructure in accordance with the law and building their R & D center.

 

“Several Measures” emphasizes that all regions shall not arbitrarily increase restrictions on foreign-invested enterprises, and we should treat the products produced by foreign-invested enterprises in China equally in accordance with the law. We should also strengthen the protection of intellectual property rights of foreign-invested enterprises, support foreign-invested enterprises to broaden their investment and financing channels and implement the unified registration of capital system for domestic and foreign-funded enterprises.

 

In fact, the protection policy of intellectual property in China has achieved initial success. “One US company’s CEO told me he has confidence in China’s IPR protection,” says Wang Shouwen, "He has won 28 of 30 (IP) lawsuits in China.”

 

More noteworthy thing is that “Several Measures” also mentioned that we will further liberalize the opening-up in finance field, which shows one of China’s opening up directions and the confidence that we will further expand opening-up . Wang Shouwen said that as for the specific timetable, the Ministry of Commerce will further communicate with the financial authorities to promote the early introduction of relaxation measures.

 

China’s domestic demand will bring huge opportunities for foreign investment

 

“Recently, there are some comments said that the investment opportunities in China are decreasing and the return on investment is decreasing”, Wang Shouwen said, the opportunities for investment in China are very large. In the next five years, China’s domestic market demand will reach 10 trillion US dollars, which will bring foreign investors a huge opportunity.

 

“In the first 11 months of this year, total retail sales of social consumer goods in China increased by 10.4%, which all indicating China’s economic vitality, opportunities and potential, Wang Shouwen said. “China now expedites its step of opening up, and it will soon announce its 20 measures in expanding opening-up and attracting foreign investment. China is try to open up, relax or orderly open up the previously restricted areas. So, the field that foreign investment has no chance to enter before, they may have the opportunity to enter into it in the future, which also will bring a good opportunity for foreign investment.”

 

According to the “Business Confidence Survey of 2016” released by the EU Chamber of Commerce last year, more than two-thirds of EU investment enterprises in China are profitable. The “World Investment Report of 2016 “ published by the United Nations Conference on Trade and Development last year has carried out extensive research; it shows that China remains the second most popular investment destination in the world.

 

A survey by the American Chamber of Commerce in China also shows that more than 60% of its members have made China one of the top three global investment destinations. On the 20th of last month, JETRO also found that the willingness of Japanese companies to expand investment in China also increased by two percentage points compared to 2015, based on an overall assessment of the investment environment in 20 countries and regions.

 

Wang Shouwen said that the investigation report of the above institutions showed that foreign investors have more willingness and confidence to invest in China. In fact, many large enterprises, such as Volkswagen, BMW, Air Liquide, IKEA and so on, have increased investment in China, that is to say, China’s investment environment has been recognized by foreign investors.

 

Source: Translated from Invest Guangzhou, Jan. 10, 2017