China needs to lower operational costs to attract foreign, domestic investment

By Hu Weijia Source:Global Times Published: 2017/3/6 0:28:39

All sectors open to foreign investors should be open to Chinese domestic private capital, said a government work report delivered by Premier Li Keqiang on Sunday. China used to give more favorable treatment to foreign enterprises than it did to domestic ones, but it seems that the so-called super-national treatment has come to an end. How will China maintain its attractiveness for foreign investors in this context? It is worth thinking about.

The American Chamber of Commerce in China released a survey earlier this year saying that China had become a less attractive destination for foreign firms. According to the report, 80 percent of the companies surveyed said they "feel foreign companies are less welcome than in the past," and 60 percent of responders have "little or no confidence" that the government will further open up the domestic market in the next three years.

A more effective way to regain and enhance investor confidence is reflecting on China's own problems to further improve the investment environment. However, it is no longer the time that China gives priority to foreign investors. Instead measures toward foreign investment should be better integrated into the bigger picture of the economy. In a bid to reduce institutional transaction costs, China needs to continue to streamline its government functions. Lowering operational costs will be conductive to not only attracting foreign investment but also to boosting the enthusiasm of Chinese private firms.

Additionally, China needs to promote further reforms of State-owned enterprises to expand market access for both foreign and Chinese private companies. Li Keqiang mentioned in the government work report that China will further lift barriers to market access for foreign investors in the service, manufacturing and mining sectors. Local authorities should execute this change strictly.

Li also said that China will encourage foreign firms to be listed and issue bonds in China and allow them to join national science and technology programs. Even though foreign firms are less likely to receive super-national treatment, the Chinese government is expected to continue to roll out measures to boost foreign investment in the high-tech and green industries.

China is currently in a transitional period as its domestic companies become more mature, however, foreign investment is still as important as before. Official data showed that foreign direct investment into the Chinese mainland rose 4.1 percent year-on-year to reach 813.2 billion yuan ($126 billion) last year, which created a lot of jobs for Chinese people. Li Keqiang said Sunday that China aims to add 11 million urban jobs this year. There is no doubt that an increase in foreign investment will be conducive to this goal.

The author is a reporter with the Global Times.


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