Guidelines optimize foreign investment environment

Foreign-invested enterprises play a vital role in China's foreign trade, contributing significantly to its stability and quality improvement.

China's State Council has unveiled a comprehensive set of guidelines earlier this month and aimed at optimizing the foreign investment environment and attracting more foreign investments to the country.

The guidelines, which consist of 24 policy measures spanning six key areas, demonstrate China's commitment to fostering a market-oriented, law-based, and internationalized business environment.

These six aspects are: improving the quality of foreign capital utilization, guaranteeing the national treatment of foreign-invested enterprises, strengthening the protection of foreign investment, improving the facilitation of investment and operation, increasing fiscal and tax support, and improving ways to promote foreign investment.

It has received positive feedback from experts for the reflection of China's commitment to opening up to the outside world and addressing the practical needs of economic development.

Yang Jianwen, a senior expert of the National High-end Think Tank at Shanghai Academy of Social Sciences, viewed the guidelines as a pragmatic and concrete approach to optimizing the foreign investment environment.

An overall evaluation of the guidelines

At this juncture, the issuance of new measures to stabilize foreign investment is of special significance. It continues the policy of opening-up to the outside world, while it also meets the needs of practical economic development, especially in the face of new challenges to the current economic operation.

The background and significance of releasing the guidelines

Currently, the focus in China is to "stabilize" (including addressing the negative impact of weak external demand and decoupling). The next step is to "seize" the opportunities (mainly of the new changes in international capital flows and speeds), which may give a new meaning to the overall tone of "seeking progress while maintaining stability."

The guidelines serve as a continuation and starting point. If they produce actual effects, it will boost investment confidence and help seize development opportunities in the next step, thereby laying a solid foundation for achieving the goals of 2035.

At the same time, it may directly affect the flow of international capital.

The Asia-Pacific region's growth potential and attractiveness are undeniable. However, limitations in the channels for entering the Chinese mainland still exist, as evidenced by the initial ignition of the Hong Kong and South Korean markets by international capital this year.

Therefore, whether we can accelerate the promotion of liberalization and facilitation, speed up the alignment with high-standard international economic and trade rules, and create a market-oriented, internationalized, rule-of-law-based business environment will become important factors affecting the flow of international capital and thus influencing the new changes in the international economic landscape.

Major differences compared with the previous measures

Regarding the differences between the guidelines and other foreign investment policies issued in the past few years, there are two main points.

Difference #1: It reflects the pragmatism of policies, which are down to earth and with significant intensity.

For instance, while the market access of the service industry has been discussed before, these guidelines directly indicate that China is accelerating the comprehensive pilot program for the expansion of service sector opening. And specifically implementing them in foreign-funded research and development centers, foreign-funded investment companies, and vocational training.

Previously, Internet services and cross-border data flow were sensitive areas. But this time they are not only directly addressed but also approached with an open attitude, providing a green channel under the premise of security and order, increasing the proportion of equity investment in the former and providing a green channel for the latter.

Difference #2: It benchmarks international high-standard economic and trade rules, which are reflected in the majority of the provisions.

This can be connected with the measures issued by the State Council in end-June, which conditionally align free trade pilot zones and free trade ports with international high standards.

It also aligns with the exchange documents submitted to CPTPP member countries during the same period.

These clearly indicate the principles and guidelines that China will adhere to in the future when creating an investment environment and attracting foreign investment, thus stabilizing the policy expectations of overseas investors.

"The expectation of profitability in the super large-scale market, combined with the expectation of high-standard institutional openness, forms the basis for multinational enterprises' investment and international capital inflows," Yang said.

Highlight on intellectual property protection

When commenting on specific measures, Yang pointed out that several measures in the guidelines emphasize the strengthening of intellectual property protection for foreign-invested enterprises.

This includes enhancing administrative protection of intellectual property rights and increasing the enforcement efforts of them.

Intellectual property protection has long been a concern, both domestically and internationally, despite the Chinese government's efforts to prioritize and enforce IP protection.

"The concerns primarily revolve around three possible issues: failure to implement existing measures, lack of fairness in regulations, and inadequate supervision of the system," Yang said.

In response to these concerns, this document stresses the need to optimize the infringement ruling system, strengthen the enforcement of rulings, and ensure the effectiveness of preventive measures.

Although these measures may not completely solve the problems, they are a significant step forward, he said.

On some other notable measures

Also mentioned in the document is the facilitation of cross-border data flows. Recognizing the importance of data security, China aims to promote efficient data flows while ensuring security and orderliness.

Pilot explorations are underway to address the lack of convenience and freedom in the institutional process of assessments, certifications, and data flows.

Additionally, it addresses the expansion of market access for investment companies and underscores the importance of national treatment for government procurement.

These measures aim to create a more open and level playing field for foreign investors, allowing them to compete on an equal footing with domestic counterparts.

The guidelines recognize the significance of human resources in driving economic development as well.

They aim to facilitate the entry and stay of economic and trade personnel, providing support and convenience to those engaging in business activities in China.