China to introduce reforms to boost FDI

The Dollar Business Bureau

After the newly appointed Chinese Minister of Commerce, Zhong Shan, spoke about intensifying the drive for FDI, Premier of state Li Keqiang reiterated the need to attract FDI in his annual address to National People's Congress.

“Foreign firms will be treated the same as domestic firms when it comes to license applications, standard setting, government procurement and will enjoy same preferential policies under Made in China 2025 initiative,” he said.

Liberalising manufacturing, service, financial and mining sectors is part of the reform aimed at increasing FDI inflows into a slowing economy. Firms having foreign investment will be encouraged to issue bonds in the country, get listed and actively take part in the national science and tech projects. Integration of customs throughout the nation, and a single window clearance for international trade were also announced as measures to promote investment in China.

As China battles with slowing exports and an ageing population, it has set target GDP growth rate for the year 2017 at 6.5%, down from 6.7% last year. China's rise to the world's second largest economy was fueled by its ability to attract FDI aggressively in the past few decades. One-fifth of the country's tax revenue, one-seventh of its urban employment and almost half of its cross-border trade is contributed by foreign enterprises. But its image as the no.1 investment destination is now fast losing momentum.

In 2015, for the first time, India triumphed over China ($56.6 billion) and USA ($59.6 billion) to receive the highest amount of greenfield FDI ($63 billion). This record achievement was attributed to a overwhelming positive global perception of India as an investment destination following Modi's pitch for 'Make in India'.

China's FDI inflows recouped to a large extent last year, touching $118 billion, showing a 4.1% increase over 2015, according to Chinese Ministry of Commerce. This resulted from easing of foreign investment approval procedures and relaxation of restrictions in the free trade zones (FTZ). This year, the country is headed towards building more FTZs and opening up more sectors.