Beijing city intends to ease strict capital controls and establish a fast-track mechanism to review cross-border data flows. Foreign investment-related funds will be allowed to freely flow in or out, and without delay, if such transactions are “authentic and compliant with Chinese regulations”, according to a draft regulation released by the Beijing Municipal Commerce Bureau. Meanwhile, the legitimately earned revenue of foreign, Hong Kong, Taiwan and Macao employees, including salaries and other income, would be allowed to be transferred overseas. City authorities are soliciting public feedback on the proposal until October 20. “The measures are needed to expand institutional opening-up and to create a more transparent, stable and predictable business environment,” the Bureau said in an online statement. The move comes as China is trying to curb an exodus of capital – both in equity markets and greenfield investment – amid a slumping domestic economy and rising geopolitical tensions.
The Shanghai municipal government announced that in the China (Shanghai) Pilot Free Trade Zone, all investment-related inward and outward remittances made by foreign investors will be allowed to flow freely as long as they are deemed aboveboard and compliant, according to a set of 31 new measures released by the Shanghai government. The policy has been in effect since September 1. In terms of capital remittances, businesses are allowed to freely and promptly transfer their legitimate and authorized transfers related to foreign investment. Such transfers include capital contributions, profits, dividends, interest payouts, capital gains, total or partial proceeds from the sale of investments, and payments made under contract, among others, according to the State Council. The measures will initially be implemented in FTZs in Shanghai, Beijing, Tianjin, and the provinces of Guangdong and Fujian, and Hainan Free Trade Port.
Ding Shuang, Chief Greater China Economist at Standard Chartered Bank, described Beijing's announcement as “just a reassurance”. “If China wants to keep or further attract more foreign investment, it needs to give investors more certainty – including more transparent policies and fulfilling the promises it has made in the past,” Ding said. Foreign businesses have long complained about the uneven playing field in China, and in recent years the list has grown to include the country’s disruptive Covid controls, China-U.S. tensions, and policy uncertainties concerning anti-espionage and data-security laws. Strict capital controls have long been viewed as an obstacle to investing in China. In the January-July period, foreign direct investment (FDI) dropped by 9.8%, in U.S.-dollar terms, from a year earlier to USD111.8 billion, according to the Ministry of Commerce (MOFCOM). August also saw the biggest-ever monthly outflow of overseas investment from the A-share market, according to the U.S.-based Institute of International Finance. American fund manager Mark Mobius complained in March that he could not move his money out of China due to its strict capital controls, but China’s forex regulator downplayed the claim.
U.S. firms also reported the lowest optimism concerning China’s economic prospects because of regulatory uncertainties, deteriorating bilateral relations and escalating geopolitical risks, according to the American Chamber of Commerce in Shanghai. China’s top leadership has been stepping up efforts in recent months to win back overseas investors. Last month, the State Council released a 24-point list of guidelines to attract overseas firms, including issuing business visas and offering tax incentives. On September 18, China’s central bank met with foreign banks and multinational firms, including JPMorgan, HSBC, Deutsche Bank and Tesla, pledging to optimize policy support, the South China Morning Post reports.
China will also launch a new system at the end of this month for foreign companies to file complaints, grievances and suggestions, so that the government could redress them promptly, thereby helping improve the business climate and attract more foreign investment, the China Daily reports. An official made the announcement ahead of the 2023 Qingdao Multinationals Summit, which will be held in Qingdao, Shandong province, from October 10 to 12.
Recently, several large foreign investment deals have been concluded. Swire Coca-Cola launched a beverage plant in Suzhou with a total investment of CNY2 billion, the largest investment by the company in the Chinese mainland to date. Covering 116,000 square meters, the plant is expected to be completed and put into operation by the end of 2025, with 13 production lines planned. Karen So, Managing Director of Swire Coca-Cola, said that the company expects to have total investment of more than CNY12 billion in the coming 10 years.
Adidas launched an autonomous delivery center in Suzhou with an investment of CNY1 billion, the company's largest investment in China in the past five years. From a global perspective, China is not only a market, but also a manufacturing and supply base for global products. A large number of Adidas' shoes and clothing products are made by Chinese suppliers. “I am very happy that Adidas will always be in China,” Björn Gulden, CEO of Adidas, said.
Beverage chain Starbucks opened a new coffee innovation park in Jiangsu's Kunshan with an investment of about USD220 million. It is Starbucks' largest manufacturing and distribution investment outside the U.S., the company said. Foreign enterprises' expansion moves in China are just the opposite of foreign media reports that claim a withdrawal of foreign investment, Huo Jianguo, Vice Chairman of the China Society for World Trade Organization Studies in Beijing, told the Global Times.
Foreign direct investment (FDI) into China in the first eight months reached CNY847.17 billion, down 5.1% year-on-year. MOFCOM has said fluctuations in FDI are a normal part of market behavior, and the sluggish global economic recovery and a high base effect were behind the drop. Actually used FDI in manufacturing totaled CNY239.95 billion, an annual increase of 6.8%, and FDI in the high-tech industry surged 19.7%. According to a report of the Development Research Center of the State Council published during the just closed 23rd China International Fair for Investment and Trade, China has maintained its position as the world's second-largest recipient of foreign investment since 2017 and remains one of the most attractive investment destinations globally.
