InfoGraphic

FDI barriers likely to be eased further

By Ding Qingfen (China Daily)
Updated: 2010-04-08 09:59

BEIJING - China will introduce steps to facilitate inward foreign direct investment (FDI) and to spur outbound direct investment, a top official from the Ministry of Commerce said on Wednesday.

The timing is right for foreign companies to make investments or increase investments in China as it would not only increase their competitive edge, but also help them tide over the global financial crisis, said Liu Zuozhang, director general of the Investment Promotion Agency under the Commerce Ministry.

"We expect local branches of multinational companies to actively and effectively communicate the significance of the Chinese market and the tremendous opportunities that exist here," said Liu.

The official's remarks come close on the heels of US Internet search giant Google deciding to pull out of China and apprehensions among foreign companies over the business climate in the country.

"China is the best FDI destination in the world due to its low labor costs and the huge domestic market," said Long Guoqiang, director general of the Research Department of Foreign Economic Relations under the State Council Development Research Center.

The State Council Development Research Center is a think-tank for China's decision makers.

Long said he remained upbeat on the FDI prospects for this year.

Last year, China's FDI dropped 2.6 percent to $90 billion, while the global FDI fell 39 percent in the same period.

The nation is also stepping up its efforts to evolve guidelines for foreign investment aimed at creating a more business-friendly environment for multinational companies, he said.

"China needs to open up further to attract more foreign capital. Encouraging foreign companies to undertake more mergers and acquisitions in China would be a top priority in the new guidelines," said Long.

Elucidating his point, Long said China's economic growth would continue to be the strongest in the world over the next few years.

Foreign businesses, however, have their own concerns and complaints. They are unhappy about the barriers imposed by the Chinese government in sectors like automobiles, telecommunications and financials.

Automobile manufacturing is an typical example for this. Foreign companies have to establish 50-50 joint ventures in order to operate in China, and the rules have not changed during the past three decades.

Another sore point has been the rules governing the government procurement policy that keeps most of the foreign companies out the ambit of government orders.

"No government policy is perfect, and so is the case with China also. Restrictions in some areas are a common practice worldwide. But the positive thing is China will definitely be more and more receptive to foreign companies and the restrictions would be loosened gradually," said Long.

Wang Zhile, director of the research center on transnational corporations under the Ministry of Commerce, too agrees. "Foreign companies should look more at the mainstream trend on FDI," he said.