Streamlining China’s business environment will benefit foreign investors

Note: The following is an edited translation of a commentary from the Chinese-language “Commentaries on International Affairs.”

China’s government has decided to make further streamlining of the business environment one of its top ten priorities this year. This is expected to enhance the country’s economic competitiveness against the backdrop of global uncertainties.

China’s draft Foreign Investment Law clearly stipulates protections for the intellectual property rights of foreign investors and foreign-owned firms and forbids the use of administrative tools to force technology transfers.

Since late 2012, government reforms such as tax and fee reductions, cuts to red tape, and the delegation of administrative controls has led to a remarkable improvement in the business environment. In the World Bank’s Doing Business 2019 report, China overtook 32 economies to rank 46th among the 190 countries and regions surveyed – the largest rise in this year’s rankings.

Faced with an increasingly complicated and austere global environment, the government is committed to implementing additional measures to further improve the domestic business environment this year. In the Government Work Report submitted to the nation’s lawmakers on Tuesday, the government promised to shorten the list of industry sectors closed to foreign investment, simplify approval procedures, and lighten the burden of taxes and fees on enterprises to the tune of 300 billion U.S. dollars. The government also promised to abide by the principle of competitive neutrality, so that all enterprises, regardless of their ownership, will have an equal footing when it comes to market access, licensing and approvals, and government procurement.

When it comes to the rule of law, the government has promised to further align its policies with internationally-accepted trade rules, enhance the transparency of policies, and be more consistent with the implementation of regulations. The final draft of the Foreign Investment Law, which has been submitted to the national legislature for deliberation, has clearly stipulated protections for the intellectual property rights of foreign investors and foreign-owned firms, and forbids the use of administrative tools to force technology transfers. This will ultimately eliminate hidden risks and concerns for foreign investors.

Against the backdrop of a nearly 20 percent slump in global cross-border investment, China’s actual use of foreign capital (excluding capital influx in the banking, securities, and insurance sectors) was up 3 percent to hit a new high of 135 billion U.S. dollars last year. And more than 60,000 foreign-owned enterprises were established during the period – an annual increase of nearly 70 percent. These achievements owe a lot to China’s improving business environment and its dynamic market of 1.4 billion consumers. There is still a lot to be done before China catches up with countries that have a world-leading business environment. But as more policies favorable to business are introduced, China’s market will be increasingly appealing to outside investors.

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