FDI policies aimed to boost industry upgrading: experts

Updated: 2010-01-02 13:54
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China's efforts to boost more foreign investment in high-tech and new energy sectors were congruent with the nation's industry upgrading goals, Chinese economists said.

Zuo Xiaolei, chief economist with the Galaxy Securities, said when China started its reform and opening-up drive three decades ago, the inflow of foreign direct investment (FDI) played an important role in boosting economy growth and creating jobs.

"However, with the rapid development of Chinese economy, if foreign investment is only pooled into low-end manufacturing industries, that is not in agreement with China's efforts to change its economic growth pattern," Zuo said.

China encouraged overseas investors to invest in new energy, environmental protection, high-tech, modern service, advanced manufacturing sectors, according to a statement issued Wednesday after an executive meeting of the State Council, or the Cabinet, chaired by Premier Wen Jiabao.

"During the post-crisis period, Chinese foreign investment environment has also gone through great changes including the rise of labor and energy costs. The quality and effectiveness of foreign investment is now more important than its scale," said Zhang Yansheng, director of the Institute of Foreign Trade of the National Development and Reform Commission.

More efforts would be made to promote the transformation of the economic development pattern and structural adjustment and to enhance the focus and flexibility of economic policy in 2010, according to the 2009 Central Economic Work Conference concluded last month.

China's economy was full of vitality and the country's industrial upgrading and urbanization were in process, which would mean plenty of investment opportunities, said Isaac Souede, chairman and chief executive officer of US-based Permal Group Inc, a leading asset management firm.

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Policy and funding support will be given to overseas investment in under-developed western and central region for investing in those industries conforming to environmental protection standards, according to Wednesday's statement.

"Compared with China's coastal areas, China's central and western provinces still have the advantage of developing labor-intensive industries," Zuo said.

Figures revealed that the total FDI in China's vast central and western localities only accounted for 7.2 percent of the nation's total in 2008.

"Foreign-funded companies should have more access to financing and would be encouraged to take part in the mergers, acquisitions and reshuffling of Chinese enterprises," said participants of the Wednesday meeting.

This move was encouraging and symptomatic of the ongoing internationalization of China, Souede said.

Experts also warned against possible risks involved.

Zuo urged local governments to be aware of the influx of hot money and closely track the use and going of foreign capital.