China further opens its door to attract FDI

Foreign direct investment (FDI) is essential for achieving sustainable economic growth and navigating the geopolitical complexities. Accordingly, China recently unveiled a strategic action plan for stabilizing foreign investment in 2025 to align its high-level opening-up with international economic and trade rules after having removed many restrictions on foreign investment in the manufacturing sector last year. The action plan, jointly devised by the Ministry of Commerce and the National Development and Reform Commission, was approved by the State Council, China's Cabinet, at its executive meeting.

As part of China's latest efforts to attract more FDI, the action plan includes 20 specific measures in four aspects. China will implement pilot programs to open up such sectors as value-added telecommunications, biotechnology and wholly foreign-owned hospitals, providing comprehensive services for foreign-invested projects in these sectors.

In addition to progressively liberalizing the education and culture sectors, China hopes to expand its pilot programs by opening up industries such as the services sector, telecom and medical services. China is also committed to removing all market access restrictions in the manufacturing sector, ensuring equal treatment of goods produced by domestic and foreign enterprises, improving access to credit, and allowing more foreign companies to participate in sectors such as those related to animal husbandry including animal breeding, and production of feed and feeding equipment and veterinary medicine, as well as eldercare, cultural tourism and sports.

About 59,080 new foreign-invested businesses were started in China in 2024 alone, up 9.9 percent year-on-year. On the other hand, China's overseas investment has increased significantly from 2021 to 2023 — to more than 1 trillion yuan ($139.5 billion) a year. In January, total FDI in China reached 97.59 billion yuan, an increase of 27.5 percent over the previous month, with 12.5 percent of all FDIs being used in high-tech manufacturing.

China's action plan will play a key role in attracting high-quality foreign investment, boosting economic development by increasing tax revenue, creating a large number of local jobs, and improving the living standards of local people. This is due to the further opening-up of the manufacturing and other industries to foreign investors, the growth in FDI, and the optimization of pilot programs in sectors such as telecom, healthcare and education.

Increasing FDI in the telecom sector will further boost China's high-end manufacturing, the green sector, cross-border e-commerce, digital transformation, and research and development of artificial intelligence. Amid the unveiling of DeepSeek, AI's Sputnik moment, China made a calculated decision to open up its telecom sector, which would spur innovation-led growth and improve China's ability to advance cutting-edge digital technology. Notably, China launched a new pilot program last October, expanding foreign access to data centers and value-added telecom services in Beijing, Shanghai, Shenzhen, and Hainan province.

The action plan is a milestone in China's healthcare sector in that it enabled the establishment of wholly foreign-owned hospitals in some major cities. Aside from easing restrictions on FDI in the healthcare sector, China has also been upgrading and expanding healthcare infrastructure to better address medical issues and develop the "Healthy China 2030" program.

The country may also expand youth and research education exchanges with other countries, attract and train foreign talents, and promote vocational education by further opening up the education sector.

This might prove to be a turning point in China's economic recovery, which in turn will improve the country's healthcare and technology infrastructure, enrich its cultural heritage and boost its silver economy. China is still a coveted investment destination, and the action plan will further boost investor confidence in China's market, encourage foreign entities to invest more in the country, attracting more foreign capital in the shape of long-term investment in Chinese publicly-traded companies.

Besides, the government's policy to improve financial flexibility will allow foreign-invested businesses to access domestic finance for equity investment by lifting restrictions on domestic loans. The strategic investment of foreign entities in Chinese equity offers the opportunity to unleash the unrealized growth potential of the stock market, while boosting flexibility and encouraging larger-scale investment.

By creating a more business-friendly environment through, among other things, the continuous shortening of the negative list, and with 21 free trade zones, a vast market, growing numbers of foreign enterprises, and comprehensive and efficient industry and supply chains, China is set to draw more foreign investment. The Chinese government is also promoting innovation, building mega projects, advancing new quality productive forces, further deepening reform and making concerted efforts to attract more investment to achieve sustainable development.

In particular, the action plan's long-term investment attraction strategy is essential for China to meet its development requirement as it proceeds to realize high-quality economic development.

The author is a Bangladesh-based independent columnist and freelance journalist who writes on contemporary international issues.

The views don't necessarily reflect those of China Daily.

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