China Shifts Focus of Drawing Foreign Investment

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Last updated at: (Beijing Time) Tuesday, December 25, 2001

China Shifts Focus of Drawing Foreign Investment

China will shift the focal point of utilizing foreign investment from attracting funds to introducing advanced technology, management and specialized talents. With diversified areas foreign investment to be involved, SOEs are expected to strenghten cooperation with foreign-funded enterprises.

China to transfer its focal point on using foreign investment

China will shift the focal point of utilizing foreign investment from attracting funds to introducing advanced technology, management and specialized talents, officials said Monday.

According to China's plan of using foreign investment and making investment abroad for the period of 2001-05, China will channel a major part of foreign investment to its service sector instead of the manufacturing sector, which used to draw the largest amount of foreign funding in the past.

The State Development Planning Commission (SDPC) said China will introduce foreign funding mainly through foreign direct investment and other channels. The government will strengthen guidance of and supervision over foreign invested projects, instead of relying on administrative examination and approval to control such projects in the past.

Three areas to see fast growth of foreign investment

The SDPC predicts that three areas -- government-encouraged industries, central and eastern areas of China, and transfer of advanced technology and management -- will see the fastest growth of foreign investment in the next few years.

According to the SDPC, China will encourage foreign investors to put their money in fields such as agriculture, high-tech industry, agriculture, infrastructure and environmental protection.

China will also encourage multinational companies to set up production bases in the country.

By gradually opening its service industry to foreign investors, China will focus on introducing advanced operational methods, management expertise and skilled professionals from abroad.

SOEs expected to cooperate with foreign-funded enterprises

The SDPC said that China will allow a group of large state-owned enterprises (SOEs) to sell part of their shares overseas. International companies will be allowed to own the majority shares of Chinese SOEs. Some of the SOEs will be selected for overseas listing.

China is planning to help a big number of foreign-funded enterprises establish themselves in western area of the country. In the meantime, coastal areas in east China will upgrade the standards of technology and added value so as to create new competitive edges.

The SDPC said China will maintain the scale of using loans from international financial organizations and foreign governments in the next few years. However, it will use the money in a wider scope, including projects for infrastructure, ecological environment, poverty elimination and social development.

China will also keep the overall size of its foreign debt under control, SDPC officials say.

Foreign investment on a rise

According to latest figures from the Chinese Ministry of Foreign Trade and Economic Cooperation, China approved 22,915 new enterprises backed by foreign direct investment (FDI) in the first eleven months of 2001, up 16.32 percent from the same period of last year.

During this period, the contracted foreign investment totaled 60.41 billion U.S. dollars, a year-on-year increase of 24.38 percent; while foreign funds actually used rose 15.61 percent to 41.9 billion U.S. dollars.

New sectors to open

According to China's promises upon its WTO entry, the country will open the sectors of commerce, finance, insurance and tourism wider to foreign investors and further improve its investment environment.

New ways to utilize foreign investment

Nowadays, venture investment and investment fund have become new channels for luring foreign capital, especially those from multinationals, into the transformation of China's state-owned enterprises.

The Chinese government also encourages multinationals to establish research and development centers in China.

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