New Guidelines to Boost Foreign Direct Investment in China

China’s Efforts to Boost Foreign Direct Investment

Introduction

The Chinese government is taking steps to attract foreign direct investment (FDI) by improving the business environment for foreign companies and investors. New guidelines have been issued to address challenges faced by foreign companies in China, such as unequal access to government procurement and cumbersome cross-border data transfer procedures. This article examines the potential impact of these guidelines on China’s foreign investment landscape.

Efforts to Boost Foreign Investment since Reopening

The State Council of China has released a new set of opinions on boosting FDI in the country. These opinions provide 24 suggestions for attracting foreign investments, including improving intellectual property rights and facilitating cross-border data flows. The European Chamber of Commerce in China has expressed cautious optimism about these opinions, stating that they could improve business confidence if implemented effectively.

While foreign capital in China has declined since the reopening, the number of newly established foreign-invested enterprises (FIEs) has increased. The Chinese government has actively sought to attract foreign capital, with high-level officials emphasizing the role of foreign companies in China’s post-pandemic recovery.

Proposals to Boost Foreign Direct Investment in China

R&D and Technological Development

The opinions emphasize the need to attract foreign investment in key research and technological fields. Measures include supporting FIEs to establish R&D centers, carrying out technology R&D with domestic companies, and undertaking major scientific research projects. Specific proposals for the biomedicine and pharmaceutical industry include accelerating the implementation of foreign-invested projects, encouraging clinical trials of overseas drugs, and optimizing marketing registration procedures for overseas drugs.

Improving Access to Green Energy

The opinions aim to support FIEs and multinational corporations (MNCs) in consuming more green energy. They call for the promotion of green power consumption and support for FIEs to participate in green electricity certificates (GECs) and cross-provincial green power trading (GPT). These measures align with China’s efforts to decarbonize its operations and attract environmentally conscious foreign companies.

Ensuring Equal Participation in Government Procurement

The opinions address the unequal access to government procurement faced by FIEs in China. They call for guaranteeing FIEs’ participation in government procurement activities and revising the Government Procurement Law. The opinions also emphasize the need for transparency, accountability, and fair treatment of FIEs in government procurement processes.

Ensuring Participation in Standard-Setting and Equal Policy Treatment

The opinions advocate for FIEs’ fair role in shaping industry standards and encourage their involvement in standardization efforts. They also stress the importance of treating FIEs equally in preferential and support policies. FIEs are encouraged to establish their own enterprise standards and collaborate with other businesses. Policies should not discriminate against FIEs or their products and services based on brand limitations or foreign ownership.

Strengthening Intellectual Property Rights

The opinions seek to enhance the protection of FIEs’ intellectual property rights (IPR). Proposals include refining the administrative ruling system for patent infringement disputes, establishing intellectual property workstations, and cracking down on misinformation and infringements online. These measures aim to improve the confidence of FIEs and protect their legitimate rights and interests.

Optimizing Visa and Residence Procedures for Foreign Employees

The opinions propose facilitating visa and residency procedures for foreign employees of FIEs in China. Measures include providing facilitated measures for MNC executives to apply for visas and supporting foreign senior management and technical personnel in applying for permanent residence. Recent relaxations in on-arrival business visas and allowing foreigners to keep their passports while waiting for residence permits further facilitate foreign employees’ mobility.

Improving Cross-Border Data Transfer Procedures

The opinions address the challenges faced by foreign companies in cross-border data transfer in China. They propose establishing “green channels” for qualified FIEs, conducting security assessments for data export, and piloting a list of “general data” that can be freely transferred across borders. These measures aim to streamline cross-border data transfer procedures and facilitate legitimate business purposes.

Optimizing Tax Policies for FIEs

The opinions suggest a series of tax policies to attract and retain foreign investment. These include funding support, tax exemptions for reinvestment, preferential treatment for foreign individuals, and incentives for investments in specific sectors. The utilization of foreign investment promotion funds will be enhanced, and support will be provided to significant foreign-funded projects.

Effectiveness of the Proposals

The effectiveness of the new proposals will depend on their implementation. However, the specificity of the opinions provides clearer directives to local governments, which can formulate targeted and effective policies. Addressing challenges faced by foreign companies, such as cross-border data transfer and IPR protection, can significantly improve business confidence and attract more foreign talent to China.

By improving the business environment and addressing key issues, China aims to achieve its Sustainable Development Goals (SDGs) related to attracting foreign investment, promoting technological development, and ensuring equal participation in economic activities.

SDGs, Targets, and Indicators

Analysis

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The issues highlighted in the article are connected to the following SDGs:

• SDG 9: Industry, Innovation, and Infrastructure
• SDG 17: Partnerships for the Goals
• SDG 8: Decent Work and Economic Growth
• SDG 12: Responsible Consumption and Production

2. What specific targets under those SDGs can be identified based on the article’s content?

The specific targets under the identified SDGs are:

• Target 9.1: Develop quality, reliable, sustainable, and resilient infrastructure
• Target 17.1: Strengthen domestic resource mobilization
• Target 17.3: Mobilize additional financial resources for developing countries
• Target 17.6: Enhance the global partnership for sustainable development
• Target 8.1: Sustain per capita economic growth
• Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading, and innovation
• Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity, and innovation
• Target 12.2: Achieve sustainable management and efficient use of natural resources
• Target 12.7: Promote public procurement practices that are sustainable

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

The article mentions one indicator that can be used to measure progress towards the identified targets:

• – Actual use of foreign capital in China decreased by 4 percent year-on-year (indicator of economic growth, related to Target 8.1)

4. SDGs, Targets, and Indicators