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Creating a Better Environment for Foreign Investment
In pursuit of innovative, coordinated, open, green and inclusive development, the Chinese Government will promote foreign investment in a number of key industrial sectors
By Zhou Mi | NO. 35 AUGUST 31, 2017

Opening markets to foreign investment has long been a cornerstone of China's opening-up policy. Both China's economy and foreign companies have achieved significant development over the past decades.

At the beginning of 2017, with trade protectionism casting a shadow on the global economy, Chinese President Xi Jinping made a pledge in his speech at the World Economic Forum in Davos, Switzerland, that China would always be open to the world.

During the first seven months of this year, foreign investment in China decreased 1.2 percent year on year. The State Council, China's cabinet, in mid-August announced new policies in five areas to enhance investors' confidence and improve the business environment.

China has huge markets and a comprehensive industrial structure, which greatly appeal to foreign investors. After years of efforts, China now has strong industrial competitiveness in international markets.

Further expanding market access will attract more foreign investment and create new demand. China will adopt a policy that combines national treatment with a negative list. Such a policy has long been used in many developed economies. While opening markets to foreign capital, it also helps reduce administrative costs significantly.

In pursuit of innovative, coordinated, open, green and inclusive development, the Chinese Government will promote foreign investment in a number of key industrial sectors. This measure will help accelerate economic restructuring and upgrading as well as realize sustainable growth.

Fiscal policy is an important lever for macroeconomic control and social wealth distribution. It also has a big influence on company behavior. When making new fiscal policy to promote foreign investment, the government should learn from experience and maintain balance in giving foreign investors national treatment. Foreign investment in different sectors is sensitive in responding to tax policies. With preferential tax policies, such as postponing tax payments, the government can encourage foreign investment in specific projects or sectors, especially the hi-tech and high value-added services sectors. Multinational companies should be encouraged to set up regional headquarters in China, and invest in the less developed west and former heavy industry base in northeast China as well as in infrastructure construction and important projects.

As frontiers to facilitate China's opening up to foreign investment, national industrial parks have played an important role in the nation's economic growth. Under the new circumstances, those industrial parks should adapt to the times, upgrading and continuing to play a leading role in regional economic growth. Therefore, the government should further grant them greater administrative authority, guarantee land supply for their development and expansion, and provide better services for industrial development, so that they can continue to attract quality foreign investment and serve China's economic growth as industry clusters.

Competition for talent has become intense in the 21st century. Multinational corporations attach importance to the quality of talent and the convenience of the flow of professionals across borders. While some countries have tightened their border control to limit foreigners' entry and stay, China is making efforts to provide better services as well as living and working environments for foreign professionals. The new permit for foreigners working in China was officially implemented nationwide in April, providing more convenient services for professionals such as managers, engineers and technicians. The government is also working on improving visa regulations for international professionals.

To improve the legal environment for foreign investment, the government should issue unified laws and regulations on domestic and foreign investment and abolish outdated laws and regulations. Establishing a mechanism for resolving complaints by foreign investors can effectively reduce the cost of communication.

Investment is regarded as a scarce resource in international markets. All countries and governments attach great importance to attracting foreign investment.

Currently, China's demand for foreign investment has become diversified along with the international industrial transfer and the technological innovation boom. To provide a stable and predictable environment for foreign investors, the government should standardize and coordinate various regional measures, and create a more attractive environment based on resource conditions, industries and markets across China. It should also explore different patterns to promote diversified development.

The author is a researcher with the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce. This article was originally published on

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