China's investment environment improving, not worsening

08:00, July 20, 2010      

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While China strives to create a more open and fair business environment, the country also wants business to embrace environmental-friendly policies. The move, aimed at a sustainable growth, should not be interpreted as worsening the investment conditions, analysts note.

"Currently, there is an allegation that China's investment environment is worsening. I think it is untrue," Premier Wen Jiabao said while talking with heads of prestigious German and Chinese firms in northwest China's Xi'an city over the weekend.

Although Chinese leaders stated that China welcomes foreign investment as always, some western media have repeatedly run stories that claim China's investment environment is worsening.

Statistics, however, tell a different story. Foreign direct investment (FDI) that flowed into China in June surged 39.6 percent from a year earlier, resulting in a 19.6-percent year-on-year increase during the first half of this year.

"Foreign investment will not pour into a country where the investment environment is worsening," Wen said.

China will continue both its opening-up policy and improving its investment environment, as the government promised, but structural changes are expected because both China and the world are changing, analysts said.

For the past 30 years, China has been wooing foreign investment with many preferential policies designed to attract badly-needed capital, advanced technology and management expertise.

However, China is no longer in desperate need of capital as the country has accumulated huge foreign reserves, but China still seeks technologies and management, in some cases even more strongly than before, such as those related to clean energy, sustainable development, pollution control, health care and medical areas, Robert Lawrence Kuhn, an international investment banker and corporate strategist, told Xinhua.

"The challenge for China now is to attract the right kind of FDI as it strives to rebalance its economy, improve the environment, and move up the value chain," the World Bank said in a report released Saturday.

"As a result, recent FDI strategies have taken a more selective approach to attract environmentally sustainable, energy efficient, and technologically advanced industries. As befits its economic global rank, China is providing a level playing field for all firms, domestic or foreign alike," the report wrote.

China has scaled back tax privileges for international companies, putting them on an equal footing with their Chinese peers by unifying the corporate income tax rates for Chinese enterprises and foreign companies.

In April, China unveiled new foreign investment rules, encouraging foreign investment in high-tech industries, the service sector, and energy-efficient and environmental protection projects, especially in China's central and western regions.

Qualified foreign-funded companies will also be allowed to go public, issue corporate bonds or medium-term bills in China.

Chinese officials stressed that the restriction for investment in industries that pollute or with over-capacity problems was not aimed at turning foreign investors away.

In the post-crisis era, one of the changes in China's investment environment is that the country is focusing more on the quality and efficiency of incoming foreign investment, said Zhang Yansheng, a researcher at the National Development and Reform Commission, the country's top economic planner.

"The change is not only in line with China's efforts to transform its economic development pattern, but also is consistent with the global trend of cutting emissions and developing low-carbon economies," Zhang said. "The policy adjustment is fair as it applies to both domestic and foreign companies."

"Foreign companies should adapt to the change as a sound legal system and an open, fair and transparent business environment will benefit all market players," said He Manqing, head of the Research Center on Transnational Corporations affiliated to China's Ministry of Commerce.

Meanwhile, the Chinese government has also attempted to listen to voices of foreign companies on policy making.

The government is making relentless efforts to enhance protection of intellectual property rights, an issue of major concern for foreign companies.

In April, China modified draft rules of "indigenous innovation" programs after foreign companies' complaints. The revised rules dropped previous requirements that trademarks and brands must first be registered in China to be qualified as "indigenous innovation" and a product must possess technology that matched international standards.



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