At a glance: The National Development and Reform Commission (NDRC) and five ministries issued 15 measures to boost inbound foreign investment, primarily in the manufacturing sector. The document instructs officials to improve the business environment for foreign firms and strengthen their contribution to the government’s strategic priorities. Key measures include:
- Support foreign investors to set up research and development (R&D) centers in China, deepen science and technology (S&T) cooperation and localize value chain segments such as R&D and design
- Boost foreign investment in advanced manufacturing, high-end equipment and core components, as well as green technology innovation
- Facilitate the entry and exit of foreign enterprise executives, technicians and their families, on the premise of effectively preventing and controlling Covid-outbreaks
- Increase investment matchmaking activities with foreign firms in the medical, semiconductor, chemical energy and other key industrial sectors
MERICS comment: Foreign firms are critically important for China’s ambitions to remain a manufacturing powerhouse and move up the value chain. Without foreign technology and know-how, it will be far more difficult for China to achieve self-reliance in key sectors. The US recently expanded restrictions on high-tech exports to China, thus increasing the necessity for Beijing to entice foreign enterprises to invest and bring technology into the country.
Despite the absence of concrete actions to incentivize more investment among the fifteen policy measures, they are a signal that China’s arms are still open to the foreign business community. The document’s release may have been timed to act as a counterweight to the announcement of China’s new supreme leaders on October 23. The absence of any market-oriented official in the new Politburo Standing Committee led to a sell-off of mainland stocks listed in Hong Kong on October 24. The NDRC and Ministry of Commerce subsequently issued an updated catalog of industries where foreign investment is encouraged on October 28, also focusing on the manufacturing sector.
Until China changes course on its Covid-zero policy, it is unlikely to regain the confidence of foreign investors. China’s economic performance will continue to remain suppressed, and weaken the attractiveness of further investment, until it begins to relax Covid controls.
Article: Notice on Several Policy Measures to Promote the Expansion, Stock and Quality of Foreign Investment with a Focus on the Manufacturing Sector (国家发展改革委等部门印发《关于以制造业为重点促进外资扩增量稳存量提质量的若干政策措施》的通知) (Link)
Issuing bodies: NDRC, MOFCOM, MIIT, MNR, MEE, MOT
Date: October 25, 2022