Wang Xiaohong: To Create a Favorable Environment to Attract Foreign Investment

—By Wang Xiaohong 

Recently, the State Council issued the "Opinions on Further Optimizing the Foreign Investment Environment and Increasing the Attraction of Foreign Investment" (The Opinions), which outlines specific measures to ensure national treatment for foreign-invested enterprises, enhance protection for foreign investment, improve the convenience of investment operations, increase financial and tax support, and refine the ways to promote foreign investment. With significant efforts and practical measures, this will effectively promote China's alignment with high-standard international economic and trade rules, deepen the reform of the foreign investment management system, and facilitate the creation of a world-class market-oriented, rule-of-law, and internationalized environment for foreign investment. Local authorities should strengthen policy support, formulate detailed rules based on local conditions, and ensure the effective implementation of responsibilities.

Elevating the quality of foreign capital utilization is an inevitable requirement for the high-quality development of China's economy. As China transitions from a high-speed development phase to a high-quality development stage, the service industry takes the lead in the industrial structure. The industrial chain is progressing towards high-end, digitization, and green development, with innovation becoming the primary driving force. The digital economy serves as the new engine, demanding that the utilization of foreign capital not only emphasizes scale and speed but also places significant importance on quality and efficiency:

1. Continue to leverage the role of foreign capital in driving technological innovation in China. Support foreign investment in establishing research and development centers, taking on significant scientific research projects, and collaborating with domestic enterprises in research, development, and industrial applications;

2. Enhance competitiveness in attracting foreign investment in high-tech fields. The Opinions proposes measures to support the establishment of foreign investment projects in the biopharmaceutical sector and encourages foreign enterprises to conduct clinical trials for stem cells and gene therapy drugs;

3. Sustain the expansion of openness in the service industry. Continue to play a leading role in demonstrating comprehensive pilot openings in the service industry, proactively explore international high-standard economic and trade rules, and become a model for institutionalized openness;

4. Leverage the strong complementary nature of regional resource endowments in China to facilitate the transfer of industrial gradients. The Opinions suggests using open platforms such as free trade pilot zones, national new areas, and national development zones as a basis, encouraging collaboration between the eastern, central, western, northeast, and border regions through mechanisms like sharing output value and benefits;

5. Improve the mechanism for regular communication. Through institutionalized mechanisms such as specialized task forces for foreign investment projects and roundtable meetings for foreign-invested enterprises, establish a framework for providing timely, accurate, and personalized services to address issues related to land, energy, labor, and cross-border fund flows.

Placing the safeguarding of national treatment for foreign-invested enterprises at a crucial position in creating a fair competitive market environment. On one hand, ensuring that foreign-invested enterprises enjoy equal treatment, The Opinions proposes accelerating the revision of the Government Procurement Law, safeguarding the participation of foreign-invested enterprises in government procurement, clarifying the "Made in China" standard, and prohibiting the setting of additional conditions for foreign-invested enterprises or supporting R&D of globally leading products through methods like first-purchase ordering. On the other hand, supporting foreign-invested enterprises in participating in standard setting. The Opinions emphasizes the protection of foreign-invested enterprises in participating in standardization technical committees, encouraging them to formulate standards and engage in standardization services, which will promote the internationalization of standards across industries, products, services, technologies, and management in China.

Considering the protection of the legitimate rights and interests of foreign capital as a crucial aspect of building a legal and business-friendly environment. Firstly, improving the international mechanism for resolving investment disputes. The Opinions, in response to the higher requirements for the internationalization of dispute resolution mechanisms in high-standard free trade agreements, strengthens the improvement of mechanisms to address international investment disputes. Secondly, enhancing the protection of intellectual property rights. The Opinions proposes important measures such as increasing law enforcement efforts for intellectual property protection and combating infringement activities. Thirdly, ensuring policy stability, transparency, and predictability. The Opinions suggests that the formulation of foreign trade and economic policies should focus on listening to the opinions of foreign-invested enterprises, enhancing transparency and predictability, and reasonably setting transition periods.

Promoting the cross-border flow of personnel and data as a key focus for improving the level of investment operation facilitation. The Opinions proposes further optimizing measures for the entry and exit of personnel, providing convenience for the entry, residence, and permanent residence of foreign executives, technical personnel, and their families. It is beneficial for foreign-invested enterprises to efficiently allocate global talent resources. The document also suggests exploring a secure and convenient management mechanism for the cross-border flow of data, enhancing the security and convenience of data cross-border flow for multinational companies engaged in global research and development, operation, and services.

Increasing financial and tax support for key projects, key areas, talents, and research and development. The Opinions proposes strengthening the guiding role of central special funds for foreign economic and trade development, increasing matching funds from local governments, and augmenting support for foreign-invested projects in key areas, key industry chains, and key fields. It particularly encourages foreign-invested enterprises to reinvest profits domestically. Additionally, the document further emphasizes the benefits provided to foreign-funded research and development centers, such as enjoying national technology innovation import tax policies, VAT refund policies for purchasing domestic equipment, and tax-free policies for housing subsidies for employees and their children's education in foreign-invested enterprises. These measures effectively reduce the research and development innovation costs for multinational corporations.

(The author is the Deputy Head and professor of the Department of Research Management and Information Services, China Center for International Economic Exchanges) 

(The original article was published on Economic Daily on 29^th August, 2023)