The American Chamber of Commerce in China (AmCham China) said it is sending a delegation to an investment fair to be held in Xi'an in Northwest China's Shaanxi Province.

It is the first time that the organization is taking part in the China Western Region Foreign Investment Promotion Fair.

China is currently implementing a "western development" strategy and has decreed a series of preferential policies for foreign investors to encourage them to go west.

But the amount of foreign direct investment flowing into western China has not increased much.

Michael Furst, AmCham China executive director, said "western development" is a long-term effort and the preferential policies would take 10 to 20 years to have a significant effect.

Foreign direct investment is concentrated in three major areas in China: Beijing, the Yangtze River Delta around Shanghai, and the Pearl River Delta around Guangzhou.

These areas have a critical mass of suppliers and services, making it easy for foreign companies to make money, said Furst.

He said seminars and fairs spreading information on business opportunities in western China are important to get foreign investors familiar with the business environment there.

The director said more and more foreign firms that are already well established in eastern China are considering expanding into other regions of the country, including western China.

At present, foreign investment going to the west mainly flows into sectors related with natural resources, high technology and tourism in Chongqing or Xi'an.

To facilitate foreign investors' activities in China, a temporary rule on foreign-funded investment companies has been revised for the third time and the changes will take effect next Monday.

The capital input of foreign investors will no longer be restricted to convertible foreign currency. As from next Monday, it can be renminbi from foreign investors' profits or revenue from share transfers or liquidation.

The revised rule will raise the threshold for setting up foreign-funded investment companies from US$30 million to US$100 million in registered capital. It will also raise the ceiling for the amount of the investment companies' loans from four times to six times the amount of their registered capital.

The rule revision is designed to encourage foreign-funded investment companies to grow, said Jin Baisheng, a senior researcher with the Chinese Academy of International Trade and Economic Cooperation, a think-tank of the Ministry of Commerce.

Foreign-funded investment companies are already able to set up foreign-funded shareholding companies or buy non-tradable legal-person shares in foreign-funded companies. The revised rule means they will also be allowed to buy non-tradable legal-person shares in all shareholding companies in China.

The revised rule also relaxes controls on the sectors in which foreign-funded investment companies are allowed to operate.

Jin noted that the service sector has been added to the list.

Drawing on lessons from cases of corporate accounting fraud in the United States, the Chinese Government requires foreign investors to provide legally audited balance sheets for the past three years before setting up an investment company.

(China Daily April 3, 2003)