| China's
Absorption of Foreign Investment |
|
|
 China's
absorption of foreign investment is an important content
of China's fundamental principle of opening up to
the outside world, and also an important component
of Deng Xiaoping Theory, and is one of the great practices
of building up socialist economy with Chinese characteristics.
The Third Session of the Eleventh Central Committee
of the Party in 1978 confirmed over again the ideological
line of emancipating the mind and seeking truth from
facts, and realized the historical transformation
of key work for the entire Party. It also established
the basic line of focusing on the central task of
economic construction, and made up the great decision
of reform and opening up to the outside world. The
Law of the¡¡People's¡¡Republic¡¡of¡¡China¡¡on¡¡Chinese-Foreign
Equity Joint Ventures, was promulgated by the National
People's Congress in 1979, then the work of utilizing
foreign capital as an important content of opening
up to the outside world initiated as China's fundamental
principle. After twenty years of great efforts, the
scale of absorbing foreign capital increasingly expanded
as well as the level was increasingly upgraded when
China's law and managerial system on foreign investment
have been gradually perfected. The achievements won
the whole world's attention, which effectively promoted
the continuous, fast and healthy development of national
economy. |
| I
The basic means of China's absorption of foreign investments |
The
foreign investments are basically divided into direct
investment and other means of investment. The direct
investment, which is widely adopted, includes Sino-foreign
joint ventures, joint exploitation and exclusively
foreign-owned enterprises, foreign-funded share-holding
companies and joint development. The other means of
investment includes compensation trade and processing
and assembling.
1. Sino-foreign joint ventures
Sino-foreign joint ventures are also known as share-holding
corporations. They are formed in China with joint
capitals by foreign companies, enterprises, other
economic organizations and individuals with Chinese
companies, enterprises, other economic organizations
and individuals. The main feature is that the joint
parties invest together, operate together, take risk
according to the ratio of their capitals and take
responsibility of losses and profits. The capitals
from different parties are translated into the ratios
of capitals, and in general the capital from foreign
party should not be lower than 25%.
The Sino-foreign joint ventures are among the first
forms of China's absorption of foreign direct investment
and they account for the biggest part. At present
they are still a great part in the absorption of foreign
investments.
2. Cooperative businesses
Cooperative business is also called contractual cooperation
businesses. They are formed in China with joint capitals
or terms of cooperation by foreign companies, enterprises,
other economic organizations and individuals with
Chinese companies, enterprises, other economic organizations
and individuals. The rights and obligations of different
parties are embedded in the contract. To establish
a cooperative business, the foreign party, generally
speaking, supplies all or most of the capital while
Chinese party supplies land, factory buildings, and
useful facilities, and also some supply a certain
amount of capital, too.
3. Exclusively foreign-owned enterprises
Exclusively foreign-owned enterprises, which are totally
invested by foreign party in China by foreign companies,
enterprises, other economic organizations and individuals
in accordance with laws of China. According to the
law of foreign-funded enterprises, the establishment
of foreign enterprises should benefit the development
of our national economy and agree with at least one
of the following criteria: the enterprises must adopt
international advanced technology and facility; all
or most of the products must be export-oriented. The
foreign funded enterprises often take the form of
limited liability.
4.Joint exploitation
Joint exploitation is the abbreviation of maritime
and overland oil joint exploitation. It is a widely
adopted measure of economic cooperation in the international
natural resources field. The striking features are
high risk, high investment and high reward. The joint
development is often divided into three steps: exploitation,
development and production. Compared with the other
three means mentioned above, joint cooperation accounts
for a small ratio.
5.Foreign-funded share-holding companies Foreign companies,
enterprises, other economic organizations and individuals
can form foreign funded share-holding companies in
China with Chinese companies, enterprises, and other
economic organizations. The total capital of the share-holding
company is formed by equal shares£¬shareholders will
take due responsibilities for the company according
to shares purchased; company will take responsibilities
for all its debts through all its assets and the Chinese
and foreign shareholders will hold the shares of the
company. Among them, the shares purchased and held
by foreign investors account for more than 25% of
the total registered capital of the company. Limited
company can be founded either by means of starting-up
or raising, and the limited liability company invested
by the foreigners can also apply to turn into share-holding
companies. The qualified enterprises can also apply
to issue A & B share and list abroad.
6. New types of foreign investment While expanding
areas and opening-up domestic market, China is also
exploring and expanding actively its new types of
utilizing foreign investment such as BOT, investment
company and so on. Since multinational merger and
acquisition has become the major type of international
direct investment, Chinese government is now researching
and enacting related policies so as to facilitate
the foreigners to invest in China by means of merger
and acquisition. |
| II.
China's policy direction of absorption of foreign
investment |
We
should hold up high the flag of Deng Xiaoping Theory,
follow the requirement of three representatives, center
on the principles and policies of our nation's economic
and social development determined at the 16th National
Congress of the Communist Party of China, adapt to
the new situation of world economic development, stick
to the principles of active and reasonable utilization
of foreign capital, combine foreign capital absorption
with economic structure adjustment and industrial
upgrading promotion, the improvement of socialist
market economy system, the reinforcement of enterprise
competitiveness, the expansion of export and development
of open economy, the vigorous exploitation of China's
western area, and promotion of regional economies'
harmonious development. Measures should be taken to
further improve the soft environment for foreign investment,
explore actively new methods for absorbing foreign
capital, put emphasis on absorbing advanced technologies,
modern management and special talents, and actively
absorb foreign capital to invest in industries of
new and advanced technologies, encourage multinational
to set up district headquarters, research and procurement
centers; speed up the development of supporting industries
and push on the service trade field to open up to
foreign countries step by step.
1. Energetically improve the political and legal environment
for foreign investment, and to enhance legal administration
level. According to our commissions for joining WTO
and the requirement for our opening-up process, we
will further improve the legal system of absorbing
foreign investment, keep on the steadiness, consistency,
predictability and feasibility of the policies and
laws of foreign investment laws, try to create a united,
steady, transparent and predictable environment for
foreign investment. We will further simplify the examination
and approval procedures for foreign investment and
adopt a standardized examination and approval system;
reinforce our sense of legality, try to be open, just
and transparent, and establish an incorruptible, industrious,
pragmatic and effective government, creating a good
administrative environment for foreign investment.
2. Maintain and improve an open and fair market environment.
We should combine this with the current work of rectifying
and standardizing the order of market economy, prohibit
firmly the improper collecting fees from foreign companies
as well as improper inspection and fine of them. Measures
should be taken to destroy local protectionism and
industrial monopoly. We should also enhance the lawful
measures to protect the intellectual property right
and take strong actions against illegal piracy, therefore,
establish an open, unified and fair market environment,
further perfect the complaining mechanism of foreign-funded
and protect the legal rights of foreign merchants
according to law.
3. Further open the field of service industry. In
accordance with China's self-development and Commitment
to the WTO, we will open this field vigorously and
steadily and systematically, perfect rules and regulations
for service industry and formulate a united and standard
system for accession into the market of foreign investment
service. We will encourage the import of modern service
concepts and advanced management experiences, technologies
and modes of modern market operation, improve structure
of service industry in China.
4. Encourage foreign businessmen to invest in the
new high-tech industry, the basic industry, and supporting
industry. The ability of technology innovation and
sustainable development directly reflect the competitiveness
advantages of a country. We will continue to encourage
foreign investors to introduce, develop and innovate
technology and to invest in technology-intensive project,
and projects with advanced technology and to guide
in enterprise registered capital proportion limitation
and funding condition. The relevant stipulations of
setting pioneering investment enterprise should also
be consummated in order to facilitate the conditions
of setting and developing high-tech corporations.
We should attract foreigners to invest in supporting
industry and encourage the localization of new materials,
push domestic small and medium-sized enterprises to
enforce cooperation with foreign companies and introduce
the advanced and applicable technology to match the
large foreign-funded enterprises, thus to enter the
production and sales network of multinational companies.
5. Attract actively more multinational companies to
invest in China. Multinational companies as leading
force of today's world economy. We will pay more attention
to improve the relevant policies to attract multinationals
to invest in China, establish the local headquarters
and set up cross-country procurement centers. Using
the experience and methods of merger and acquisition
of other countries and taking the economical system
with China's characteristics and realities of into
consideration, we should speed up the step to draft
and improve the practical policy and stipulations
of investment through merger and acquisition, further
revise the relevant stipulations of the foreign-invested
share-holding companies, push the formulation and
perfecting of BOT and special permission transfer
investment methods, the various stipulations for foreign-funded
enterprise's listing domestically and abroad.
6. Further promote foreign invest in the central and
western regions. Vast areas in these regions are rich
in resources for farming and stock raising, mineral
resources and tourist resources. With a large population
and a market of great potential labor forces, other
key elements for production are relatively inexpensive
with the steady progress and western development strategy,
such facilities as transportation, communication and
construction has impressively improved. Because of
the improvement of investment environment and ecological
development and emergence of potential for the development
of specialty economy, foreign businessmen who invest
in these regions are facing brand-new opportunities
and great development space. |
|
|
