Foreign Investors Encouraged to Participate in SOE Reform

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Last updated at: (Beijing Time) Wednesday, February 27, 2002

Foreign Investors Encouraged to Participate in SOE Reform

Foreigners are likely to acquire more investment opportunities in China since the central government approved a fresh regulation on Tuesday to attract foreign capital. China's WTO entry boosts economic co-operation with foreign countries, and investors and the government are expected to meet the opportunity.

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China to cooperate with foreign investors

Foreigners are likely to acquire more investment opportunities in China since the central government approved a fresh regulation on Tuesday to attract foreign capital.

The regulation, which will take effect on April 1, outlines how China will expand co-operation with foreign investors.

In particular, it appeals for capital in agricultural technology, transportation, energy and new material industry.

Foreigners encouraged to invest in basic industries

The service industry - including banking, telecommunications, securities, insurance and tourism - will gradually become another focal point of co-operation.

In the last two decades, China has mainly opened its manufacturing industry to overseas investors, and the nation will continue to encourage foreigners to invest in basic industries, infrastructure construction and environmental protection. An official with the State Development Planning Commission (SDPC), the State's highest economic planning authority, said the new foreign investment guideline was tailored to the commitments China had made before it became a World Trade Organization (WTO) member.

Compared with the old foreign investment guideline, the government has given foreigners more investment opportunities.

Overseas investors expected to hold SOE's share

Bai Hejin, president of China Academy of Macroeconomics Research under the SDPC, said China's WTO entry boosts economic co-operation with foreign countries, and investors and the government should meet the opportunity.

"China's WTO membership has reduced risks and cost for foreign investors, and more capital and advanced techniques and expertise are expected to flow in," Bai said.

However, the country hopes foreign investors start businesses in the western regions, where they will enjoy more favourable taxation policies for the next 10 years, according to the investment guideline.

From 2001 to 2010, income tax will stay at 15 per cent if enterprises invest in industries encouraged by the government.

In addition, the government encourages foreigners to take part in key State-owned enterprises (SOEs) reform.

According to the regulation, overseas investors are expected to become shareholders in key SOEs.

The government is planning to sell a certain amount of SOE shares to foreigners over the next five years to speed up the restructuring of SOEs, an SDPC source said. The official refused to be identified. Overseas investors will even be allowed to hold the controlling stake in large SOEs, except for those of key importance to national or economic security, the commission official said.

Foreign investment is increasing

Beijing is witnessing a rapid influx of foreign investment, an official with the city commission of foreign trade and economic cooperation said recently.

Last year, the city approved 1,147 overseas-funded projects, which involved a total contractual foreign investment of 3.22 billion U.S. dollars, up 10.7 percent year on year. Total foreign investment actually used in the year stood at 4.01 billion U.S. dollars, a hefty growth of 33.2 percent. >>details

Main foreign investors

The foreign investors included 159 of the world top 500 multinational companies, 19 of whom established their regional headquarters and a big number of research and development institutions in the Chinese capital. >>details

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