Liza Lin Shanghai
CHINA plans to suspend some laws on foreign investment in proposed new free trade zones, including in Shanghai, as part of Premier Li Keqiang’s drive to open up the economy to sustain growth.
The changes would provide “innovative” ways of opening up the economy, remove unnecessary administration, and help transform the state’s role in the economy, said the State Council following a meeting led by Li on Friday.
China is boosting efforts to attract foreign companies after investment from abroad fell last year for the first time since the global financial crisis. Free trade zones that cut bureaucracy and test financial liberalisation may offer incentives that help maintain economic growth of at least 7 percent a year as the export- and investment-led model of expansion runs out of steam.
“The Chinese government knows that having foreign investment is a very good thing and they want this to be an attractive market for strategic and financial investors,” said Kent Kedl, the managing director for greater China and north Asia for risk consulting firm Control Risks.
“Many foreign investors are concerned about the bureaucracy and lack of clarity around regulations. That’s probably the biggest concern when they come in” to China.
Foreign direct investment in China fell 3.7 percent last year to $111.7 billion (R1.1 trillion) from a record $116bn in 2011, state data show. Investment rose 4.9 percent in the first half of this year to $62bn.
The American Chamber of Commerce in China has urged the government to open more industries to overseas investors, while an EU business group has warned that optimism is declining and the regulatory environment worsening.
The State Council would submit a draft document to the standing committee of the National People’s Congress, the legislature, according to Friday’s council statement. If approved, the State Council would be allowed to suspend some laws on foreign investment, Sino-foreign joint ventures and co-operative enterprises in the free trade areas.
The statement did not give a time frame or additional details about the changes, which will apply to the proposed zone in Shanghai and any new ones.
While the State Council and Chinese media use the term “free trade zone”, the meaning is more akin to a free market zone subject to less regulation and interference rather than an area of duty-free trade.
The State Council said on July 3 that it had approved a pilot programme to set up the country’s first free trade zone in Shanghai, describing it as an important move to adapt to global economic and trade developments and further open up the economy.
Shanghai mayor Yang Xiong said the city would accelerate the building of the trial zone in the second half of this year, including creating laws to regulate the project, the Shanghai Daily reported on July 14.
Other cities have expressed interest in creating free trade areas. Guangdong was looking at setting up a zone in its Nansha new area, the Shanghai Securities News reported on July 25. Tianjin, a port city, submitted a plan to the Commerce Ministry last month, according to a July 10 report in the 21st Century Business Herald.
Xiamen, also a port city, was trying to get approval for a zone, Xinhua News Agency said on Friday. – Bloomberg