New Guideline to Attract Overseas Capital

Foreigners are likely to acquire more investment opportunities in China since the central government approved a fresh regulation on Tuesday to attract foreign capital.

The regulation, which will take effect on April 1, outlines how China will expand co-operation with foreign investors.

In particular, it appeals for capital in agricultural technology, transportation, energy and new material industry.

The service industry -- including banking, telecommunications, securities, insurance and tourism -- will gradually become another focal point of co-operation.

In the last two decades, China has mainly opened its manufacturing industry to overseas investors, and the nation will continue to encourage foreigners to invest in basic industries, infrastructure construction and environmental protection. An official with the State Development Planning Commission (SDPC), the State's highest economic planning authority, said the new foreign investment guideline was tailored to the commitments China had made before it became a World Trade Organization (WTO) member.

Compared with the old foreign investment guideline, the government has given foreigners more investment opportunities.

Bai Hejin, president of China Academy of Macroeconomics Research under the SDPC, said China's WTO entry boosts economic co-operation with foreign countries, and investors and the government should meet the opportunity.

"China's WTO membership has reduced risks and cost for foreign investors, and more capital and advanced techniques and expertise are expected to flow in," Bai said.

However, the country hopes foreign investors start businesses in the western regions, where they will enjoy more favourable taxation policies for the next 10 years, according to the investment guideline.

From 2001 to 2010, income tax will stay at 15 per cent if enterprises invest in industries encouraged by the government.

In addition, the government encourages foreigners to take part in key State-owned enterprises (SOEs) reform.

According to the regulation, overseas investors are expected to become shareholders in key SOEs.

The government is planning to sell a certain amount of SOE shares to foreigners over the next five years to speed up the restructuring of SOEs, an SDPC source said. The official refused to be identified. Overseas investors will even be allowed to hold the controlling stake in large SOEs, except for those of key importance to national or economic security, the commission official said.

(China Daily February 28, 2002)