China ups the ante in hunt for foreign investment, hi-tech firms, but will Beijing follow through with actions?

President Xi Jinping visited BASF Shanshan Battery Materials – a Chinese-German joint venture lithium battery material firm – in Hunan province on Monday
State Council on Tuesday also unveiled measures aimed at foreign investors and expats, including increasing the lengths of visas for overseas managers and experts

China's economic recovery

Frank Chenin Shanghai

Published: 9:30pm, 20 Mar 2024

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As the world’s second-largest economy is facing an important juncture of battling against US-led supply chain decoupling and other derisking measures, Chinese President Xi Jinping sent a clear signal of courting foreign investment and hi-tech firms this week.

During his first field inspection since the conclusion of the ‘two sessions” parliamentary meetings earlier this month, Xi visited BASF Shanshan Battery Materials – a Chinese-German joint venture producing lithium battery materials – in the central province of Hunan on Monday.

And while promising to further open up China’s market to foreign investors, Xi also promoted the so-called new quality productive forces that are intended to introduce a technological and innovation-fuelled economic transformation and provide development opportunities for foreign firms, according to the state-backed Xinhua News Agency.

A second visit to a foreign firm in less than 12 months – after Xi toured a Guangzhou-based display company in April that had received investment from South Korean conglomerate LG – was touted by Xinhua as a “further and clearer declaration of expanding high-level opening up to the world”.

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Xi’s visit was followed by a circular from the State Council on Tuesday, which provided new measures aimed at foreign investors and expats living in China.

China’s cabinet said it would increase the lengths of visas for foreign managers and experts, as well as their spouses and children, from one year to two years.

The National Immigration Administration added on Wednesday that it would extend residence permits to five years, or even offer permanent residency if foreigners meet certain criteria.

China would also waive reapplication requirements if foreign personnel working for the same employer change their work locations or pursue tertiary degrees.

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The State Council also said it would scrap all remaining access restrictions limiting foreign investment in the manufacturing sector, and said it would also begin pilot schemes to allow foreign investors to access medical and value-added telecommunication services.

It also pledged to open up its financial sector, promising to tackle areas such as data flow and participation in government procurements that are often criticised by foreign firms.

China is seeking to ensure its economy grows by Beijing’s stated target of “around 5 per cent” this year, while also retaining foreign companies amid Western-led containment efforts.

The foreign business community in China, though, has long demanded action rather than lip service.

This is a specific step forward

Former expat manager

“We are pleased to see the Chinese government’s continued efforts to focus on issues of major concern for foreign-invested companies, including clearer standards for cross-border data transfers, working towards a clear definition of ‘Made in China’, equal treatment for foreign companies in government procurement and making the visa and resident permit process more efficient,” the American Chamber of Commerce in Shanghai said on Wednesday.

The chamber added it looked forward to seeing more details on how the measures would be implemented and also working with government departments to help foreign companies benefit from their roll-out.

“This is a specific step forward,” said a former manager who left Shanghai after his visa expired at the end of last year.

The expat, speaking under the condition of anonymity due to the sensitivity of the issue, also hailed Beijing’s “small yet measurable” progress, including easier mobile and credit card payments for overseas visitors.

However, “such documents from Beijing have many measures but few come with actionable details and a long wait will always follow even if a promise is made”, he added.

Foreign direct investment in China dropped by 13.7 per cent year on year to US$163.3 billion last year.

But in a sign of improving business activity, industrial output by foreign, Hong Kong and Taiwan-invested manufacturers edged up by 6.2 per cent in the first two months of the year, outpacing the 5.8 per cent growth by state-backed firms.