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Government stresses quality for FDI, ODI

By Zheng Yangpeng (China Daily)

08:18, July 27, 2012

Energy, mining, agriculture are key sectors for outbound investment

China will shift its direct-investment focus, both foreign and outbound, to quality instead of quantity, an economic planning guideline said on Tuesday.

The National Development and Reform Commission, the country's top economic planning agency, outlined the nation's FDI and ODI development plan for the 12th Five-Year Plan (2011-15). The commission vowed to bring home advanced foreign technology, talent and management when attracting foreign capital.

To that end, China will encourage multinationals to set up regional centers, R&D centers, procurement centers and financial management centers. China will also encourage foreign companies to invest in advanced service sectors, such as modern logistics, software development, engineering design, consultancy and intellectual property service industries, the document said.

The country will strictly limit foreign investment in industries that consume a lot of energy and resources, and high-pollution industries.

"China is transferring from embracing foreign investment to selectively embracing foreign investment, in a bid to upgrade and improve the economy," said Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation.

The guideline acknowledged several hurdles to meeting this goal. One major problem is the inability to transform the large amount of FDI to China's own technological strength.

"In past years, the surging FDI preferred single ownership in China, which made the technology spillover effect hard to occur," Huo said. "Other joint ventures, targeting China's labor advantages or the consumer market, provided few chances for technology spillover."

Huo said China should ramp up its R&D ability and improve its innovation environment, which would help Chinese firms cooperate with foreign firms on technology.

The document said the government will guide foreign capital into healthcare, culture and tourism sectors, but will be more cautious in finance, securities and telecommunications.

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