Frequent adjustments of the guidance policies are not beneficial to the optimization of industrial structure in the long term. As China opens up and financial reform deepens, it is very likely to make a unified industrial policy that treats all investors equally, irrespective of where they are from. The only exception would be some strategic industries critical to national security. After the transition period given by WTO, China will see more market-oriented bids and competition, and the government is poised to oversee investment activities in a more regulatory market. For instance, the newly adopted antitrust law is applicable to all the entities doing business on the Chinese mainland.

Zhang: The major intention of this adjustment would be industrial structure optimization through investments in various sectors that we encourage, allow, limit or prohibit. The next step is to set up scientific and practical procedures to facilitate the realization of the new policies, enabling energy-saving and environment-friendly products, and those in short supply, reach China quickly. Administration by law and improvement of the legal system are key in the process.

As a matter of fact, China's traditional manufacturing industry is suffering from overcapacity. Later, foreign investment is expected to enter these fields mainly through mergers and acquisitions. In the development of the service sector, bottlenecks exist in financial service, logistics and R&D capacity. In the following years, we are expecting a rapid increase of overseas capital in those areas and the emerging manufacturing industry.

There would be a certainty of structural adjustment of foreign capital for several reasons. First, the possible appreciation of renminbi, stricter social security regulations and the revaluation of energy and land resources are expected. Second, multinationals are facing growing pressure in the Chinese market, pushing them to introduce more advanced technology to strengthen comparative advantages. Third, in recognition of the importance of IPR protection, the Chinese Government is sparing no efforts to create a more conducive market environment for foreign investors. Additionally, a more efficient business promotion system will help the investors find suitable opportunities much faster.

The NDRC's plan allows foreign investment a bigger role in the restructuring of China's state-owned enterprises to liquidate remnant assets. Does this plan in any way conflict with the regulations issued by the Ministry of Commerce, which set guidelines for international merges and acquisitions (M&A) in China? How will China ensure its economic security through antitrust legislation and other censorship and surveillance procedures?

Zhang: Since the 1990s, a trend of M&A has dominated the global market. However, China is short of rules to regulate such business transactions, such as procedures for risk appraisal and standards to identify strategic industries and sensitive products.

The monopoly is against the free market spirit and might hurt public interest. Most industries in China are taking baby steps and are fragile in the face of competition from global conglomerates. We have to strengthen our defense system against monopoly-seeking investment. Meanwhile, we will restrain market surveillance to a certain extent, and ensure it won't discourage foreign investors.

Zhao: The M&A regulations set for foreign investment, either issued by the NDRC or the Ministry of Commerce, are aimed at preventing hostile mergers that will pose threats to industrial security. Every market economy has similar rules.

The antitrust law is essential for fair market competition. After all, the multinationals can more easily form industrial monopolies because of their strong competence and tremendous capital.