China 'opening wider' for FDI

By Ding Qingfen (China Daily)
Updated: 2011-04-08 06:59
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BEIJING - China will "open wider" to the world by encouraging foreign companies to invest, for the first time, in certain industries under a new draft regulating foreign investment, experts said.

The select industries, in the recently released Foreign Direct Investment Industry Guidelines, include high-tech, clean energy, aerospace and aviation, new materials, high-end manufacturing and advanced logistics. The guidelines will replace the previous version, published in 2007.

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There are also changes in the services sector with vocational education and training encouraged in the guidelines and the medical professions are no longer excluded.

"The new version highlights China's commitment to opening wider and further in both high-end manufacturing and the modern service sectors," said Wang Zhile, director of the research center on transnational corporations under the Ministry of Commerce.

"It is also in line with China's 12th Five-Year Plan (2011-2015) on building itself into a more innovative society and on improving social welfare."

The guidelines come after a foreign direct investment (FDI) directive was issued last April encouraging more investment in the high-tech, renewable energy and service sectors, and to focus more on western and central areas.

The guidelines follow criticism by some foreign companies of China's investment environment in the latter half of last year.

"China has no reason to say no to the opening-up policy," said Li Xiaogang, director of the Foreign Investment Research Center at the Shanghai Academy of Social Sciences.

"The more open China is to the world, the more benefits China will get and the more competitive local industry will be.

"The new version is undoubtedly good news for local industry and foreign companies."

The guidelines are still being formulated and a month-long program soliciting public opinion commenced at the beginning of April.

The first guidelines were published in 1995, and they are amended every four years. The new guidelines, when implemented, will be the fifth version and should be issued in the coming months.

"As the new guidelines show, China is allowing many strategically important and emerging industries to get foreign investment," said Huo Jianguo, director of the Chinese Academy of International Trade and Economic Cooperation, a think tank affiliated to the Ministry of Commerce.

But the guidelines also prohibit foreign investment in some sectors. Foreign companies, for the first time, are excluded from some energy industries, including crude oil and nuclear fuel processing and chemical manufacturing.

Foreign companies are also prohibited from industries dealing in certain metals and marine resources as well as seed selection and production and processing agricultural goods.

"The prohibition is understandable," Huo said. "China has to say no to foreign investment in some sectors for the sake of protecting its industries and natural resources."

In February, the State Council announced it would set up a ministerial panel to examine foreign companies' proposals on buying, or merging with, domestic firms involved in defense and national security.

Government officials have consistently said that the nation always welcomes foreign business.

FDI hit a record high last year, growing by 17.4 percent from a year earlier to $105.74 billion, after dropping by 2.6 percent in 2009. From January to February, China's FDI grew by 27 percent year-on-year to $17.8 billion.