China relaxes foreign investment entry threshold in manufacturing sector
December 27, 2013--The Decision on Several Major Issues on Comprehensively Deepening Reforms released by the Chinese Communist Party Central Committee recently stipulates that to tie in with the new trend of economic globalisation, efforts should be made to promote opening up internally and externally, encourage better integration of the strategies of 'bringing in' and 'going out', and facilitate the orderly and free flow of international and local economic factors, efficient deployment of resources and integration of markets at a deep level. The document also states that development of China’s advantages in international cooperation and competition should be accelerated to promote reforms and opening up to the outside world.
Earlier, the Ministry of Commerce (MOFCOM) decided to further relax entry threshold for foreign capital to enter general manufacturing sectors like iron and steel, chemicals and automobile, including easing restrictions on foreign-invested enterprises’ registered capital, equity ratio and business scope.
Industry experts reckon that China will head towards "more marketisation" in these sectors. Not only will the entry threshold for foreign capital be relaxed, but private capital will also be given equal treatment. In the auto industry in particular, while the several leading auto groups are state-owned enterprises, private enterprises are catching up fast. In some sectors like new energy cars, battery production, energy-saving and emissions reduction technology and auto electronics, private enterprises are already very active, and are poised for further growth.
According to the latest statistics from MOFCOM, from January to October 2013, actual utilised foreign investment in the manufacturing sector topped US$38.292 billion, down 5.25% year-on-year.
A veteran industry analyst notes that the latest reform in the iron and steel industry may mean that backward production will be eliminated and the pace of industrial transformation and upgrade will be expedited. A market environment conducive to fair and orderly competition will be put in place.
Industry analysts generally believe that in the iron and steel industry, globalization will be the major trend. As such, China's iron and steel industry must proactively promote the "bringing in" and "going out" initiatives, and map out future development plans with an international perspective. Efforts should be made to enhance the nation’s capability and efficiency in deploying international resources, which in turn can drive reforms in the industry locally.
Where the heavily-polluting chemicals industry is concerned, advanced technology together with foreign capital should be introduced to assist in the industry’s technological upgrade and reduce energy consumption and emissions. According to industry experts, as the Decision is implemented gradually, the industry’s overcapacity problem will be mitigated and industrial transformation and upgrade will be accelerated.