Beijing cuts list of restrictions on foreign direct investment in free-trade zones

Move will make it easier for overseas investors to enter some sectors that were previously off limits

PUBLISHED : Saturday, 17 June, 2017, 11:20pm
UPDATED : Saturday, 17 June, 2017, 11:20pm

As foreign direct investment into the mainland stagnates, Beijing is trying to reignite interest by ­reducing the number of restrictions on investors in certain areas.

The State Council said in a statement on Friday it had cut its negative list from 122 to 95 in the mainland’s 11 free-trade zones. That means fewer restrictions for foreign capital in the trial free-trade zones – including Shanghai, Zhejiang and Chongqing – where trade and financial rules have been relaxed.

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Reducing the list is a bid to make it easier for foreign investors to enter some sectors that were previously off limits, including aircraft and shipbuilding, electric cars, telecoms equipment, reinsurance and theme parks. The Ministry of Commerce a day earlier also said it would create a new foreign investment category.

Complaints from foreign firms of rising costs and intrusive regulations have been growing, and foreign direct investment inflows – measured in yuan – fell by 3.7 per cent in the first five months from a year ago, the ministry said.

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In the financial sector, pressures on capital outflows remain despite Beijing’s strict capital ­account controls. Mainland banks sold a net US$17.1 billion in foreign currencies in May, up from US$14.9 billion the previous month, the forex regulator said.

But reducing the number of restrictions may not be enough to lure more foreign investors.

“We won’t see a significant boost to foreign direct investment with this move,” said Liu Xuezhi, a researcher at the Bank of Communications in Shanghai, adding that the reduced list only applied to the free-trade zones.

“Foreign investment in the service sector has been growing ... but the opening up of financial services, telecoms, aged care and health care is still slow,” Liu said.

Foreign direct investment in China fell about 1 per cent to US$13.4 billion last year, while the US notched up US$39.1 billion and Britain, US$25.4 billion.