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Boao Forum for Asia

Xi Jinping promises to open China’s door wider for foreign investors

Country must provide a good business environment to compete, and not just use the old tricks of lower taxes, cheap land and subsidies, leader says

PUBLISHED : Tuesday, 10 April, 2018, 11:32pm
UPDATED : Tuesday, 10 April, 2018, 11:43pm

China will open its doors “wider and wider” to foreign investors, Chinese President Xi Jinping said on Tuesday in his opening speech at the Boao Forum for Asia.

Beijing has long faced criticism about the restrictions it places on access to its markets, and as a result some foreign companies involved in labour-intensive manufacturing have relocated to other countries. Even the US is offering tax incentives in a bid to lure American business to move back home.

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China must provide a good business environment to compete, and not just use the old tricks of lower taxes, cheap land and subsidies, Xi said.

“The investment environment is like air, and fresh air can attract more foreign capital,” he said.

“In the past, China mainly relied on preferential policies to attract foreign investment, and now it must rely more on improving its investment environment,” he said, while also promising to make fair and transparent rules and to enhance protection of intellectual property rights.

The government must “resolutely eradicate any factor that keeps the market from playing a decisive role in resource allocation”, he said.

Peng Peng, vice-president of the Guangdong-based South Nongovernmental Think-tank, said Xi’s speech “showed that China would be more strict in adhering to the rules set by the World Trade Organisation”.

“The tactical significance of Xi’s speech is that although he was responding to Trump and the trade war, he wanted to show people it was not a forced concession,” he said.

The American Chamber of Commerce in South China, which represents the interests of American firms in the Pearl River Delta, said that while it welcomed Xi’s comments, it would adopt a wait-and-see approach.

“All this is expected to create a bigger market, more capital, more products, and more business opportunities for foreign investors,” it said in note. “But we reserve our full confidence until the new polices are fully implemented.”

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According to a report released by the chamber last month, problems such as China’s tax regime, land acquisition policy and cybersecurity law – which greatly increase operating costs – are the main concerns for foreign firms operating in China.

US companies have also complained that Chinese authorities do not allow them open access to markets and discriminate against them when they compete with Chinese rivals, the report said.

Foreign direct foreign investment into China rose 4 per cent year on year in 2017 to US$131 billion, according to official figures.

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Guo Wanda, vice-president of the Shenzhen-based China Development Institute, said Xi’s speech raised hopes that Guangdong would have more room to reform and improve the efficiency of its legal system and develop a more Hong Kong-like administration.

“Improving the business environment means lowering operating costs for foreign firms. It needs to be transparent in its government policy … and protect property rights to ensure a fair market,” he said.

At the early stages of its opening up in 1980s and 1990s, China offered various incentives for foreign firms to set up factories in the mainland, especially in the Pearl and Yangtze River Deltas.

But as Beijing has phased out such perks, foreign firms’ production costs have soared.