Negative list for investment

A photo illustration shows a $100 banknote placed above Chinese 100 yuan banknotes in Beijing in this May 10, 2013 file photo. [Photo/Agencies]

The volume of foreign capital used nationwide was $11.76 billion in March, a decline of 6.1 percent year-on-year, while the first-quarter volume was $29.48 billion, a decline of 2.8 percent, according to statistics from the Ministry of Commerce.

Despite emerging signs that foreign investment is shifting to high-end manufacturing and the service sector, the continuous decline in inbound foreign capital is still cause for concern and underscores the need to make institutional improvements to facilitate the inflow of foreign capital.

The "positive list" management model of local governments' different preferential policies that prevails in China has erected some "glass walls" to the entry of foreign investment in numerous fields.

China should provide a revised negative list for US investment in preparation for the China-US Bilateral Investment Treaty talks, according to US trade representative Michael Froman, and the country should accelerate drawing up a negative list and submit it to the United States as soon as possible.

The publication of such a negative list will offer a transparent and predictable institutional environment to assure foreign investors of the areas they can invest in.

If such an investment treaty is reached with the US and broad institutional changes for foreign investment are initiated, China would greatly lower the investment costs for inbound foreign capital and more effectively combine foreign capital with domestic talent, thus pushing forward the transformation and upgrading of the Chinese economy.

In the face of the gradual decline in its demographic advantage and rising manufacturing costs at a time when its society is rapidly aging, China should use the negative list system to channel foreign capital into areas that promote the transformation of its manufacturing sector from Made in China to Created in China.