Foreign capital will no longer need approval to invest or set up enterprises in the country, according to new provisions

The laws of foreign-capital enterprises and Chinese-foreign equity joint ventures have been recently amended by the National People's Congress.

The amendment says that foreign capital will no longer need approval from the government when investing or setting up enterprises in China. Foreign enterprises can be set up after reporting to related departments. The Ministry of Commerce also issued measures to implement the filing process.

The amendment, which came out as anti-globalization voices became louder, and the domestic investment environment was full of uncertainty, was surely seen as a friendly policy that can help the country attract more overseas investments. In addition, it meant that China is trying to promote further development of globalization.

In the past, the country's allure was reduced for overseas enterprises when economic growth slowed. Foreign companies' return on investment fell, but labor costs went up. Many foreign enterprises closed their factories or plants in China, and moved to member countries of the Association of Southeast Asian Nations or to other South Asian nations, where the labor prices are cheaper.

There was a long list. In January, Panasonic Industrial Devices (Beijing) Co Ltd decided to leave China. In March, Nokia Corp sold its manufacturing operations to Jabil, and closed its fourth Chinese factory in Shanghai, after closing factories in Beijing, Dongguan and Suzhou. In May, Chi Cheng Technology closed its Zhuhai plant, followed by Philips' closure of its Shenzhen factory.

There also was a report saying that Samsung had reduced its employees in China to 8,580 by 2015, from over 35,000 two years ago. In contrast, the South Korean company's employees in Southeast Asia saw huge growth to more than 140,000.

At the same time, the growth of foreign investment in China became slower. Statistics from the Ministry of Commerce said the actual use of foreign capital in the first seven months increased 4.3 percent year on year. But in July, the number decreased 1.6 percent.

In addition to the overall slowdown trend, another visible sign is that overseas investors have become more selective in terms of industries.

Overseas capital turned to the country's high-technology industries and services but not so much to the traditional industries. The use of foreign capital in traditional manufacturing decreased 5.3 percent year on year in the first seven months of this year, according to the ministry. However, the service industry attracted 7.7 percent more foreign capital year on year in the same period, and foreign investment in high-tech service industries increased 98.2 percent in the first seven months.

Western countries also tried to urge China to open its markets, and provide a more friendly investment environment. On Sept 1, only a few days before the opening of G20 Summit in Hangzhou, a report from the European Union Chamber of Commerce in China said while China was enlarging its investments in the European countries, Europe's investment in China was falling.

European enterprises that wanted to develop in Chinese markets failed to get equal treatment like their Chinese counterparts did in Europe, the report argued, adding that this situation could not last long. The American Chamber of Commerce in China, also on the same day, said in a report that foreign companies in information and communication technologies faced more difficulties in China.

In fact, foreign investors were more restrained in choosing projects in China at the time the country's private investments fell dramatically. So the government's decisions to simplify the review and approval processes for foreign investments, provide a more convenient environment for foreign capital, and help more overseas businesses enter the service industries came at the right time.

They will also help China promote its supply-side reform, increase market transparency and management abilities, and improve the country's competitive power.

The further opening of the Chinese market to overseas capital and investments also indicated China's strong determination to implement economic reform and oppose trade protectionism. It will also increase China's voice and enforce the country's leading status in proposing globalization.

The author is a senior researcher with Anbound Consulting. The views do not necessarily reflect those of China Daily.

(China Daily European Weekly 09/16/2016 page11)