China Plans to Give Foreign Investors More Market Access

Foreign investors will be given wider market access to China’s manufacturing and services sectors, according to the country’s top economic planning agencies, in an effort to stabilize foreign trade and investment as the world’s second-largest economy recovers from Covid-19.

A new draft of a catalogue of listed industries, specifying sectors eligible for preferential policies to encourage foreign investor participation, was released for public comment Friday by China’s National Development and Reform Commission and the Ministry of Commerce (MOFCOM). The 2020 edition is longer than last year’s list, adding 125 areas and amending 76 previously listed areas chiefly to expand their coverage.

Many of the revisions covered manufacturing, including raw materials, spare parts, and end products, with a focus on the automobile, computer, communications and other electronics industries.

They also aimed to further promote foreign investment in services, including research and development, logistics and information technology. One item, for example, covers development and application of systems for online education, online health care, and remote work solutions, demand for which has expanded rapidly amid the Covid-19 pandemic.

The updated list comes after the State Council, China’s cabinet, said in March that it would promote further opening-up and stabilize foreign trade and investment, by implementing six measures including expanding the catalogue of encouraged industries for foreign investment.

Projects in areas covered by the list are eligible for benefits including tariff exemptions on imported equipment, along with access to preferential land prices and looser regulation of land use, according to (link in Chinese) Zong Changqing, head of MOFCOM’s foreign investment department.

“The move can enable more foreign enterprises to reduce costs and hedge against the adverse impact of Covid-19, enhance the overall competitiveness of industries and further improve the capacity of important industrial and supply chains,” Zong said.

Foreign direct investment in nonfinancial sectors dropped by 1.3% year-on-year to 472.2 billion yuan in the first half of the year, narrowing 9.5 percentage points compared with the first quarter, according to (link in Chinese) MOFCOM spokesman Gao Feng. Gao noted the reading was “better than expected,” and a sign of foreign investors’ rebounding expectations and confidence.

But it remains “an arduous task” to keep foreign investment stable in 2020, as the global economic situation remains complicated, and there will still be many uncertainties affecting foreign investment over the course of the year, Gao said.

Contact editor Gavin Cross (gavincross@caixin.com)

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