China plans to further open the services sector to foreign investment, and to improve the foreign investment environment generally. Toward this end, China has also indicated that it expects to shortly introduce amendments to the laws governing wholly foreign-owned enterprises and joint ventures.

Foreign investment trends

According to Ministry of Commerce (MOFCOM) data, total foreign investment in 2012 was 3.7% lower than in 2011. However, MOFCOM also asserts that the industrial structure of foreign investment was optimized. Manufacturing represented 43.7% of the total foreign investment, with high-end manufacturing rapidly increasing. The service sector represented 48.2% of total foreign investment, increasing by 0.57% over 2011. Additional research and development institutions in 2012 brought the total number to more than 1,800.

Foreign investment in 2012 contributed significantly to the growth of the Chinese economy. Foreign investment fixed assets injection increased by 10.72%, total exports and imports of foreign-invested enterprises (FIEs) increased by 1.87%, with exports of high-tech products increasing by 3.47%. Tax revenues from FIEs increased by 7.11%.

Against this background, MOFCOM issued the Guiding Opinions of the Ministry of Commerce on Attracting Foreign Investment in 2013, effective 14 March 2013 (Guiding Opinions).

Objectives in 2013

The Guiding Opinions set out the following general objectives for continuing to attract foreign investment in 2013:

  • further improve the investment environment in China and further open up investment in the service sector

  • promote the transformation of foreign investment in east China and the transfer of foreign investment to middle and west China, and utilize the regional structure of foreign capital

  • further improve the foreign investment environment, effectively protecting the legitimate rights and interests of foreign investment enterprises and strengthening the protection of intellectual property rights

  • stabilize the scale of foreign investment and improve the quality of foreign investment

Major Tasks in 2013

The Guiding Opinions also elaborate various tasks for MOFCOM's local branches:

  • improve the investment environment and improve competitiveness in attracting foreign investment

  • proactively guide foreign investment and optimize China's industrial structure, in particular:

    • encourage investment in modern agriculture, high technology, advanced manufacturing, environmental protection, new energy and modern service sectors

    • encourage the establishment of regional headquarters, financial centres, and shared service centres

    • open up investment in service sectors, such as medical institutions and nursing homes

    • effectively utilize the capital markets in and outside China and support public offerings in and outside China by qualified foreign investment enterprises

    • regulate the development of foreign investment in real estate

  • improve the merger-control review system and improve the supervision of foreign M&A

Looking Forward

The new objectives and tasks require supporting policies and regulations before any real difference will be felt by foreign investors. One area in which changes are likely is in the laws and regulations governing wholly foreign-owned enterprises, Sino-foreign equity joint ventures and Sino-foreign cooperative joint ventures.

In a conference held in December 2012, MOFCOM expressed a desire to revise the foreign investment laws governing these three types of FIE. With the benefit of the Guiding Opinions, we can expect that any revision to these laws will make the establishment and operation of FIEs more straightforward. Such revisions can also be expected to use foreign investment as a means of continuing to overhaul China's industrial structure.