New rules set to boost investor sentiment

China has taken a decisive step to bolster global investor confidence by unveiling a 12-measure document aimed at encouraging foreign reinvestment in the country, offering what experts see as a timely and powerful signal that more investor-friendly reforms are in the pipeline.

"This marks a major boost for foreign companies operating in China," said Luo Rong, director of the Institute of International Economics at the Chinese Academy of Macroeconomic Research. "The document serves as a comprehensive policy measure to implement the 2025 Government Work Report's call to 'encourage foreign investors to increase their reinvestment in China', by lowering costs, streamlining procedures and strengthening policy guarantees."

Luo said the new rules will not only help stabilize existing investment but also unlock fresh inflows and upgrade the overall quality of foreign capital in China. "These practical and effective measures will drive local governments to further improve the business environment, enhance administrative efficiency, and provide more targeted, convenient and efficient services for foreign-invested enterprises to invest in China."

The document, jointly issued by the National Development and Reform Commission and six other central departments last week, calls on local governments to establish project databases tailored for reinvestment by foreign enterprises and to enhance support and services for such projects.

Bai Wenxi, vice-chairman of the China Enterprise Capital Union, said that the government is sending a clear message to encourage foreign companies to "keep profits in China for reinvestment and deepen roots here".

"The document marks the upgrades in China's institutional opening-up across multiple dimensions — land, foreign exchange, taxation, finance and industry access — reflecting a systematic, integrated and synergistic reform mindset," he said.

According to the document, foreign companies reinvesting in China will be allowed to make flexible use of industrial land through long-term leasing, lease-before-transfer arrangements and land transfers with flexible durations, in line with existing policies that encourage investment.

"Those moves will likely cut foreign firms' upfront costs, and it will shorten project launch cycles by over 30 percent when combined with local reforms," Bai added.

The notice also emphasizes the importance of implementing and enforcing tax incentives to promote foreign reinvestment in China. Foreign-invested projects in line with the catalog of encouraged industries for foreign investment will benefit from preferential policies related to the import of equipment.

"Measures mapped out by the document could unleash an estimated $50 to $80 billion for foreign firms reinvesting their retained profit in the short term, driving new investments in manufacturing upgrades, R&D hubs, and regional headquarters," Bai said.

In the medium term, Bai said he believes it will drive localized restructuring of industrial chains — especially in capital — and technology-intensive sectors such as new energy vehicles and semiconductors. "In the long run, the cumulative effects of institutional opening across land, finance, and taxation will reinforce China's position as a global FDI safe haven and deepen foreign firms' integration into local value chains."

Official data show that China attracted over $700 billion in foreign investment by the end of June, suggesting that the country has achieved its foreign investment target mapped out by the 14th Five-Year Plan (2021-25) ahead of schedule.

Looking ahead, Luo from the Institute of International Economics called for continued institutional improvement to ensure that policy implementation keeps pace with design.

"We need to build a clear communication pathway linking foreign firms, local departments and central departments, allowing issues to be raised and resolved quickly at the appropriate level," she said.