The Chinese government unveiled a comprehensive package centered on expanding openness in services such as finance, education and health care, and eliminating discrimination against foreign-invested corporations. It is seen as a move to reverse the decline in foreign direct investment (FDI) in recent years. However, while China is stressing broader opening, it is also tightening reviews of foreign corporations' investments in national security and high-tech fields, leaving it uncertain how much investor sentiment will actually recover.
China's Ministry of Commerce, the National Development and Reform Commission, and the Ministry of Finance announced the "Action plan to stabilize and improve the quality of foreign investment" on the 22nd. The plan centers on advancing 15 measures in five areas: ◇ expanding market access ◇ improving investment facilitation ◇ strengthening investment attraction ◇ ensuring services for foreign-invested corporations ◇ optimizing foreign investment management.
The Chinese government focused especially on expanding openness in finance, education and health care. In finance, it will allow foreign financial institutions to make broader use of risk management tools such as Government Bonds futures and will also support entry by foreign-invested corporations into fund investment advisory services. In education, it will expand pilot programs to open vocational education institutions and universities in science and engineering, agriculture and medicine to the outside. In health care, it will also push to expand pilot zones for biotech and for foreign-invested, wholly owned hospitals. It also plans to encourage private insurance to cover more innovative medicines and medical devices.
Longstanding discrimination issues raised by foreign corporations were also identified for improvement. The Chinese government said it will apply various corporate support policies equally to foreign-invested corporations, except in national security, and will strengthen fair-competition reviews in government procurement and bidding. It also plans to build an online infringement reporting system for corporations to protect the rights and interests of foreign-invested corporations. Vice Minister Ling Ji of the Commerce Ministry said at a press conference, "Restrictions on foreign investment in manufacturing have already all been abolished," and added, "Now it is not a market entry problem but a business licensing problem that must be solved. We will address the situation where 'the front gate is open but the small doors are closed.'"
Measures to enhance investment facilitation were also included. The Chinese government will revise rules on mergers and acquisitions (M&A) of Chinese corporations by foreign corporations and push to ease regulations on cross-border data transfer. Centered on pilot free trade zones, it will expand industry-specific rules for outbound data and will also set standards for critical data in sectors such as autos, pharmaceuticals and aviation.
The package comes as China's attraction of foreign capital has been declining. According to the Chinese business outlet Caixin, China's actual foreign investment inflow peaked at 1.2327 trillion yuan in 2022 before turning downward. Last year it fell to 747.7 billion yuan, and in January–May this year foreign investment inflows came to 327.3 billion yuan, down 8.6% from a year earlier. The Chinese government cited the global economic slowdown, geopolitical tensions and a worldwide pullback in investment as the main reasons for the drop.
The move appears to be a follow-up response by the Chinese government to revive foreign investment. However, even as the Chinese government repeatedly stresses broader opening to foreign corporations, it is tightening investment reviews in national security and high-tech fields, prompting assessments that it is uncertain how much investor sentiment can truly recover. In fact, during the process of U.S. company Meta's attempt to acquire the Chinese artificial intelligence (AI) startup Manus recently, approval issues with Chinese authorities emerged and the deal ultimately fell through. In addition, the State Council will implement tougher outbound investment controls in fields such as AI, high technology and data starting on Aug. 1.