Firms that help changing China are welcome

Updated: 2016-02-05 08:06

By He Jun(China Daily Europe)

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Although official data shows that last year foreign investment in China kept growing, the growth has been slowing as the country's economy experiences pressure.

There were 26,575 foreign investment enterprises in the country in 2015, increasing 11.8 percent year on year. Actual use of foreign capital was 781.35 billion yuan ($118.8 billion; 109 billion euros), increasing 6.4 percent year on year, according to official data. The growth rate of foreign investment in China is slowing.

Despite the slowdown, what is noteworthy is that China's policymakers and officials did not show any negative attitudes toward absorbing foreign investments, which have played an important role in China's achievements since reform and opening-up started 37 years ago.

Last year, President Xi Jinping said "three things are unchanged" about absorbing foreign investment: First, China's policies on using foreign investment will not change; second, the protection of foreign enterprises' legitimate rights will not change; and third, the orientation of providing good services to foreign enterprises during their investment and development in China will not change. Xi highlighted that the country's door will continue to stay open and China will attach more importance to opening-up.

Firms that help changing China are welcome

Xi's statement is based on the country's long-term policy. It's clear that the central government's welcome to foreign investment will not change.

However, some foreign investors say they feel it is more difficult to invest in China. A survey by the American Chamber of Commerce in China says more than one-third of US enterprises in China had flat or lower revenue in 2015, the biggest proportion in the past five years. But slowing revenue is not the biggest concern. According to the survey, inconsistent regulatory interpretations and unclear laws were the biggest challenges that foreign businesses faced in China. This was the first time that such concerns had topped the list.

According to the survey, 77 percent of US companies felt they are less welcome in China, while some said they feel it is difficult to get authorizations or licenses in China.

The feedback from the foreign enterprises is seen as candid expressions of their real feelings about doing business in China.

Why do these differences exist? They could come from the following factors:

After China's rapid economic growth of the past decades, the country has adequate money and technology. Nowadays, China has a market full of capital, and has even been aggressively investing overseas. Many Chinese businesses have become competitors of foreign investors in low-end markets.

Firms that help changing China are welcome

Generally speaking, China still welcomes foreign capital, but its needs in terms of foreign capital are different from decades ago. In the past, all kinds of foreign capital was welcomed. But now the country has begun to be picky in choosing foreign investments, considering a slew of factors such as industries, pollution levels, energy consumption, investment intensity and tax contributions.

The country's intention to develop domestic enterprises is becoming stronger. China aims to develop a more influential industrial system and cultivate domestic enterprises with global competitiveness, so policies and resources will favor domestic enterprises to some extent. The country has cultivated a lot of domestic enterprises in the past decades. The rise of Chinese telecommunication equipment manufacturers such as Huawei and ZTE, and their entry into the international market, is a good example.

National security may become one of the factors that drag down foreign investors' development in China. Policymakers' attention to national security has increased in recent years. The industry and the government intend to promote domestic enterprises within the legal framework, and replace some foreign investment and services out of consideration for national security. But it is not easy - it depends on whether Chinese enterprises have the ability to substitute foreign services.

China's environment in terms of intellectual property protection keeps some foreign investors away. Some foreign investors were afraid that Chinese enterprises' proficiency in copying may damage their intellectual property. Because China aims to boost its innovation capability, it welcomes foreign enterprises that are willing to transfer their technology and intellectual property. Those foreign investors that are more friendly in terms of technology transfers and joint innovation are likely to enter and operate in China more easily, while those who are reluctant to share their IPs and technologies may find they are not that welcome.

Currently, foreign investment in the country also is facing a "new normal". China needs foreign investment, but the foreign investors have to adapt to a changing environment in China. Better collaboration depends on adaptability from both sides.

The author is a senior researcher with Anbound Consulting, a think tank for public policy. The views do not necessarily reflect those of China Daily.

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