As part of its plan to bring back foreign investment, the State
Council issued Several Opinions on Further Improving the Work of
Foreign Capital Utilization on 6 April 2010
The Opinions contain a broad range of strategic aims, geared at
increasing foreign capital investments and channelling it in
specific directions. Many of these are re-statements of existing
policies, but sources in government tell us we can expect concrete
implementing of regulations in the near future.
The stated aims are set out below.
Amendment to the Catalogue of the Guidance of Foreign
Investment Industries ("Catalogue")
Areas open to foreign investors will be expanded. Foreign
investors will be encouraged to invest in high-end manufacturing,
hi-tech, modern service industry, "new energy" and energy
Incentives for multinationals and R&D
Transnational companies are encouraged to establish regional
headquarters, R&D centres, procurement centres, finance
management centres and accounting centres in China.
Qualified foreign invested R&D centres could apply for
exemption of custom duties and value-added tax as well as
consumption tax levied at the time of importation regarding
products necessary for technology development before 31 December
Foreign investors are encouraged to establish venture capital
enterprises and private equity funds in China, and better exit
regimes will be implemented.
Central and western regions
Foreign investors are encouraged to invest in labour-intensive
industries in the central and western regions which satisfy
environmental protection requirements. Tax incentives in these
regions would continue to apply to foreign invested enterprises
Foreign banks are encouraged to establish branches or
representative offices and operate their business in the
Qualified FIEs will be able to list in the domestic stock market
and overseas stock markets, and could issue corporate bonds and
middle-term negotiable instruments in China. The scope of offshore
entities able to issue RMB bonds in China will be expanded.
Approval procedure and devolution
Most projects whose total investment is below US$300 million in
the permitted or encouraged categories will be approved by the
local government. (Previously, this threshold was US$100
The FIE approval procedures and the foreign exchange settlement
regime will be simplified, and the approval time limit
In addition, formalizing existing practice, the Opinions state
that FIEs with difficulty meeting their funding schedules will be
allowed to obtain extensions for capital contribution.
As has been stated, the "Opinions" are a platform for
further legislation rather than concrete legislation with immediate
benefit for foreign investment. It is also likely that the State
Council has taken into consideration the amount of publicity that
issuances of this type attract, not least from summaries just like
this one, and this would help counteract some of the negative press
that some of China's perceived anti-foreign legislation has
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