Foreign capital to gain entry into more areas of economy
China’s moves to further ease foreign investment policies will open doors in some monopoly sectors this year while prohibiting local governments from curbing foreign companies, experts said.
Their comments came after the State Council issued a document late last month outlining 20 measures to spur declining investment activity, including opening the service and financial sectors, and encouraging foreign businesses to bid for infrastructure projects via franchises.
The National Development and Reform Commission, the top economic planner, for the first time delegated approval power for foreign investment under $300 million and not on the negative list to provincial-level governments.
The negative list specifies investment sectors that are off-limits to foreign investors and opens industries not on the list to treat overseas and Chinese companies equally.
“The policy adjustment will bring foreign investment, technologies, practical management methods and human resources to national development strategies,” said Lu Feng, a professor at the National School of Development of Peking University.
One of the goals of the government’s Made in China 2025 strategy is for foreign companies to be treated the same as domestic enterprises.
Additionally, manufacturing industries such as rail transportation, motorbikes and ethanol fuels will be opened up to foreign investment.
Lu said foreign companies can help propel the Made in China 2025 strategy, pushing domestic companies to accelerate the reform of traditional industries and the development of emerging industries and the service sector.
Under the new rules, foreign investment above $300 million will be examined and approved by the NDRC. Investment and capital increases by global companies over $2 billion need to be filed with the State Council, the highest executive agency of State power.
Yu Jianlong, secretary-general of Beijing-based China Chamber of International Commerce, said providing a fairer and more flexible investment environment can help Chinese companies tackle production-cost challenges from foreign rivals.
“Nearby countries, especially Vietnam and Thailand, have been initiating their own moves to entice more foreign investment to their shores,” he said.
However, Feng Hao, a rail transportation researcher at the NDRC, warned that Chinese companies such as China Railway Rolling Stock Corp, the country’s rail vehicle manufacturer, must prepare for challenges from foreign rivals like Siemens and Bombardier, which hope to gain a green light in the domestic market.
“Moreover, international core part manufacturers for rail vehicles such as ABB Group and Knorr-Bremse AG also would like to enlarge their market share in China, indicating that Chinese companies will face fierce competition in their home market,” said Feng.
Tang Wenhong, director of the Ministry of Commerce’s Department of Foreign Investment Administration, said foreign capital’s market access will also be improved in other service businesses, such as accounting, architectural design and rating services. “Sensitive industries” such as telecommunications, internet and education will gradually be opened up.