China Completely Cancels Foreign Investment Access Restrictions in the Manufacturing Industry

“Completely cancel the restrictions on foreign investment access in the manufacturing sector,” this is the blockbuster news announced by China at the opening ceremony of the third Belt and Road Forum for International Cooperation.

What does it mean to remove all restrictions on foreign investment access in the manufacturing sector? What is the impact? What kind of signal does it send?

What does “total cancellation” mean?

Chen Wenling, chief economist of the China Center for International Economic Exchanges, deputy director of the Executive Board and deputy director of the Academic Committee, said that the comprehensive cancellation of foreign investment access restrictions in the manufacturing sector means that in the future, China’s manufacturing industry in the continuous transformation and upgrading, foreign investment is barrier-free.

Bai Ming, a member of the degree Committee of the Ministry of Commerce Research Institute, told reporters that in fact, the full cancellation of foreign investment access restrictions in the manufacturing sector is a gradual process, at the beginning of the free trade pilot zone to open, now open the scope to expand to the whole country, from the free trade pilot zone to the national promotion and replication, from the pilot to the promotion of this process has been completed, it is natural.

On September 27, Sheng Qiuping, Vice Minister of Commerce, said at a press conference that at present, the negative list of foreign investment access in the pilot free trade zone has achieved “zero” in the manufacturing industry, and the next step will focus on promoting the opening up of the service industry. The Ministry of Commerce will work with relevant departments to deepen research and promote a reasonable reduction of the negative list of foreign investment in the pilot free trade zone. At the same time, promote the introduction of a negative list for cross-border trade in services, and lead the country to continue to expand opening-up.

According to the “Special Management Measures for Foreign Investment Access (Negative List)(2021 edition)”, the manufacturing industry has been basically completely opened up, only to retain the “publication printing must be controlled by the Chinese party” and “it is prohibited to invest in the application of processing technology such as steaming, stir-frying, roasting and calcining of traditional Chinese medicine slices and the production of confidential prescription products of proprietary Chinese medicine”.

In addition, the “Special Management Measures for Foreign Investment Access in the Pilot Free Trade Zone (Negative List)(2021 version)” implemented on January 1, 2022, has been reduced to 27 items, including 17 prohibited categories and 10 restricted categories, and the negative list of manufacturing items in the pilot Free trade zone has been eliminated.

What will be the impact?

In Bai Ming’s view, the full cancellation of restrictions on foreign investment access in the manufacturing sector is, on the one hand, a full reflection of China’s high-level opening up, and on the other hand, it is also the need for the development of the manufacturing industry itself.

He pointed out that the more open, the more opportunities for cooperation, because the high-quality development of China’s manufacturing industry needs to use more high-quality international elements, and comprehensive liberalization can optimize the allocation of global resources. Especially at the stage when China is moving from a manufacturing country to a manufacturing power, it should emphasize the opportunities brought by opening up.

Bai Ming believes that after full liberalization will indeed produce a certain amount of competitive pressure on domestic manufacturing enterprises, the survival of the fittest under pressure, competitive enterprises can withstand the pressure in the face of even greater development space. Because the more successful enterprises are, the more willing foreign enterprises are to cooperate with them when entering the Chinese market, so that they can complement each other’s advantages and become bigger and stronger. More importantly, learning the strengths of others through cooperation will add new impetus to the transformation and upgrading of China’s manufacturing industry.

What kind of signal does it send?

In the eyes of the outside world, this is China’s new measure to improve the business environment and increase efforts to attract foreign investment. Recently, the scale of foreign investment in China has declined. In the first eight months of this year, actual foreign investment in China fell 5.1 per cent from a year earlier, according to official data.

“The new measures send a signal that China’s door to the outside world will open even wider.” Bai Ming said that in today’s complicated world economic situation, China is more determined and confident in opening up.

Bai Ming believes that multinational companies pay special attention to the business environment, and China is not only expanding opening-up, but also optimizing the business environment, which is particularly important for the manufacturing industry. China is opening up more and more, but not all at once. Behind the opening up, there must be a series of policies to improve the business environment.

In August, The State Council issued the Opinions on Further Optimizing the Foreign Investment Environment and Increasing Efforts to Attract Foreign Investment, focusing on the prominent concerns of foreign-funded enterprises and introducing a new batch of 24 targeted policy measures.

He Yadong, spokesman of the Ministry of Commerce, said at a regular press conference on October 12 that the next step will continue to reasonably reduce the negative list of foreign investment access, study the feasibility of further cancelling or relaxing the restrictions on foreign ownership, and attract more global factors to enter the Chinese market. At the same time, it will continue to work with relevant departments and local governments to implement the Opinions of The State Council on Further Optimizing the Foreign Investment Environment and Increasing Efforts to Attract Foreign Investment, and strive to build a market-oriented, legalized and international business environment and provide better services for foreign-funded enterprises.