China revamps FDI rules, curbs non-eco-friendly projects

BEIJING: To attract more foreign direct investment (FDI), China today revamped its regulations to improve conditions for foreign companies while restricting funding for environmentally-unsound projects.

Under the new rules, FDI in high-tech industries, services sector, energy-efficient and environmental protection projects is encouraged, especially in the central and western regions, vice-commerce minister Ma Xiuhong told the press today. The State Council or the Chinese national cabinet, approved the new regulations yesterday.

Qualified foreign-funded companies will also be allowed to go public, issue corporate bonds or medium-term bills in China, said the new rules. These regulations come as FDI flow rose to $23.44 billion in the first quarter of 2010 bucking the downturn during the past eight months.

A total of 5,459 overseas-funded ventures were set up in the past three months, up 19.9 per cent from the same period last year, said Ma.

National development and reform commission vice-minister Zhang Xiaoqiang said the new rules welcome FDI in high-tech industries, services sectors, energy-saving and environment related industries, but high businesses creating pollution and consuming a lot of energy, or projects in industries running at overcapacity are not wanted.

Additionally, the new policy encourage to FDI flow into central and western regions of the country as these regions were traditionally not getting FDI as their southern and eastern peers.

Meanwhile, a national security examination mechanism will be created as soon as possible for foreign-funded mergers and acquisitions. The new rules also allow qualified foreign-funded firms to go public, or issue corporate bonds or medium-term bills in the domestic market.

The new rules also aim at diversifying the utilisation of FDI and create better circumstances, Ma said, adding, "it has always been a major task of government to provide better environment and further facilitate trade and investment."

"China is still the most attractive place for overseas investment," Ma said, citing survey results from management consultancy AT Kearney and the UN Conference on Trade and Development.

"With the new regulations, we will put more efforts into creating a more open and friendly environment for overseas firms," Ma said, adding China has attracted over USD 945 billion of foreign investment so far since the opening up of the economy, providing jobs for 45 million people. In 2009, it got USD 90 billions in FDI, which was less than that of 2008.

In 2009, industrial production value of the foreign- funded enterprises accounted for 28 per cent of the country's gross production. Officials, however, said China faces new situations as well as challenges in utilizing them in the wake of the still lingering global financial crisis.