Favorable FDI policy is essential, says report

BEIJING - The Chinese government should continue its efforts to create a favorable investment environment for foreign businesses, as they could facilitate the advancement and reformation of the nation's economy, according to a report published on Tuesday.

The China Foreign Investment Development Report 2011, released by the University of International Business and Economics (UIBE) in Beijing, said foreign direct investment (FDI) has played a positive role in boosting the economy, creating jobs and promoting trade in the three decades since the nation launched its reform and opening-up policy.

However,the ongoing debt crises in Europe and the US, and rising operational costs in China mean that there is a possibility that the foreign companies will relocate factories or withdraw investment in China, the report warned.

"China needs to continuously create a fair and good environment for foreign enterprises, in a bid to bring their potential in helping China transform its economic growth model into full play," it said.

"Services, high-end manufacturing including high-technology, new-energy, energy reduction and environmental protection will be the new growth engines for China's FDI."

So far, China has absorbed FDI worth a total of $1.2 trillion, and more than 730,000 foreign businesses have established a presence in China.

By 2010, foreign companies had created more than half of China's foreign trade, one-seventh of its jobs, one-fifth of the tax and one-fourth of the industrial output, according to the Ministry of Commerce.

However, during the past few months, foreign investment from developed economies, including the United States, has declined. Between January and October, investment from the US decreased by 18.13 percent year-on-year to $2.57 billion.

Meanwhile, with no swift resolution in sight for the European debt crisis, and as the nation's economic growth slows, the 2012 outlook for FDI in China is not positive, said Sang Baichuan, a professor at the UIBE.

On Monday, Vice-Premier Wang Qishan said that foreign businesses and investors have enjoyed preferential policies in China, and the country will continue to welcome overseas businesses and will address their concerns, including the protection of intellectual property rights (IPR) and government procurement policies.

China recently pledged to set up an office, led by Wang, to protect IPR in China over the long term.

"The Chinese market is not open enough. Openness is good for all," said Ma Yu, a senior research fellow of the Chinese Academy of International Trade and Economic Cooperation.