Foreign investment gets more market access

China eases restrictions on tourism, high-tech to attract capital: experts

The Chinese government further loosened its grip on the market by reducing the number of forbidden or restricted investment areas for overseas investors in a new draft of guidelines released on Wednesday.

The National Development and Reform Commission (NDRC), the country's top economic planning body, said it has removed restrictions on many tourism and entertainment areas in a revised Catalogue for the Guidance of Industries for Foreign Investment.

With certain limitations on the tourism and entertainment sector lifted, foreign investors can now invest in projects such as golf courses, nature sanctuaries and large theme parks.

In the new catalogue, the NDRC also opened up a number of areas in the manufacturing sector, like corn processing and motorbike manufacturing, that had been off limit to overseas investors.

The economic planner also listed a number of places in high-tech industries that foreign investors are now encouraged to enter, including automobile electronics development and new energy car parts manufacturing.

Opening the market

The number of investment areas that were forbidden or limited to overseas investors was reduced from 93 in 2015 to 62 in the revised catalogue.

First released in 1995, the catalogue has been revised six times, according to the NDRC.

The latest revisions show that the government has become more open toward overseas investment, said Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation.

The government used to worry that overseas investment would hurt domestic companies, but now those companies are strong enough to cope with such economic integration, Bai told the Global Times on Wednesday.

Furthermore, relaxing foreign investment access could even help stimulate growth in domestic industries that are in need of urgent development, like car electronics, according to Deng Tishun, Regional CIO Greater China & Chief China Strategist at UBS.

Loosening restrictions on overseas investment in these areas can help retain foreign capital at a time when expectations are rising over an interest rate hike by the U.S. Fed, a factor that may draw overseas capital back to the U.S., said Song Ding, a Shenzhen-based market analyst from the China Development Institute.

"Also, at a turning point of globalization, those measures would dispel international rumors that China is not opening up enough," Deng said.

In the first nine months of the year, $95 billion in foreign capital came into China, up 4.2 percent year-on-year, according to statistics from the Ministry of Commerce in November.

Reluctant manufacturing investors

However, removing the forbidden or restrictive investment areas does not necessarily mean overseas companies are able to flexibly invest in those areas, said Bai, noting that foreign investors still face detailed industrial standards, which are also required for domestic companies.

Though the Chinese government has been trying to attract more foreign capital and technologies into the domestic manufacturing sector, foreign investors have shown a preference for the service sector over the traditional manufacturing sector, according to experts.

For example, in the new energy car sector, domestic carmakers are in bad need of various technologies, such as hydrogen-powered fuel cells, but many overseas car companies might be reluctant to cooperate with their Chinese counterparts, according to Feng Shiming, a car analyst at Menutor Consulting.

"One reason is China's lax protection for intellectual property rights. Another reason is that China's political relations with countries like Japan and the U.S., that are rich in advanced car technologies, are unstable," Feng told the Global Times, adding that the government is trying to fill the technology gap by bringing more foreign firms into the market.

In June, the Ministry of Industry and Information Technology announced a number of companies that were qualified for making new energy car batteries.

But the ministry excluded South Korean electronics conglomerates such as LG and Samsung, which have made investments in the area, from the list, a move that media reports have attributed to the planned deployment of the Terminal High Altitude Area Defense anti-missile system in South Korea.