Premier Wen Jiabao yesterday vowed to give equal treatment to foreign companies, reassuring hundreds of executives at the World Economic Forum that the world's second-largest economy still welcomes them.
'All enterprises registered in China according to Chinese laws are Chinese enterprises. Their products are made-in-China products,' Wen said at the WEF's Annual Meeting of the New Champions in Tianjin.
Increases in productivity have moved China higher in the WEF's Global Competitive Index, yet World Bank rankings on the ease of doing business in the country have declined this year. There have been claims Beijing is discriminating against foreign companies in areas such as state procurement.
Multinationals are concerned that as China's need for foreign capital is reduced by having the world's largest foreign reserves they may be sidelined. Meanwhile, state-owned enterprises are growing stronger especially after the global financial crisis when a considerable part of the government's stimulus efforts was directed to infrastructure and other sectors where they dominate.
Wen said the concerns of foreign companies stemmed from 'misunderstanding' and 'unclearly defined Chinese policies'.
In government procurement, China gives equal treatment to all products produced on the mainland by foreign-invested enterprises and Chinese-invested enterprises alike, he said at the forum that focuses on small, high-growth companies.
Wen promised to give high priority to intellectual property protection and encouraged foreign companies to play a big role in China's initiatives to boost domestic demand and the deepening of reforms.
Complaints over policy transparency, fair dealing and market access came under the spotlight in July when General Electric chief executive Jeffrey Immelt said it was not clear whether China wanted foreign businesses to be successful.
However, in a WEF televised debate on multinationals in China yesterday, GE International president Ferdinando Beccalli-Falco said Immelt was 'unfortunately misrepresented', adding multinationals should work with the government to resolve any problems.
China would not 'close the door' to developing the economy, Wen said. Continuously rising foreign direct investment, which grew more than 20 per cent year on year in the first seven months, indicated China was still a favoured investment destination.
Jia Kang, a researcher with the Institute of Fiscal Science at the Ministry of Finance, said some local governments have not kept their word with foreign firms and changed their policies after the investment was made. And some local government purchases in the stimulus package gave preferences to local companies.
Wen said the 4 trillion yuan (HK$4.59 trillion) stimulus, unveiled in late 2008 to prevent economic slowdown, had worked well but there was a possibility of more bad loans from local government financing vehicles.
A large part of the 9.6 trillion yuan of new loans banks extended last year went to these financing vehicles, and in some cases the capacity to repay is questionable.
The local government debt problem has 'existed for a long time', and the risk has been intensifying recently, Wen said.
In the five years to 2015, China will give priority to developing agriculture, environment protection industries and manufacturing-related services, according to Wen.