Chinese officials have been on a charm offensive to regain the confidence of foreign businesses and investors in the months since China emerged from the COVID-19 pandemic.
As one of the main hubs for foreign businesses and investment, Shanghai is at the forefront of this effort. Since the start of the year, the city has released several documents aimed at bolstering the economy by providing support to the private sector. In late April, it released the Several Measures to Enhance the Attraction and Utilization of Foreign Investment in Shanghai (the “foreign investment measures”). This document proposes various measures for attracting foreign direct investment (FDI), from expanding market access to increasing policy support for foreign companies in key industries.
Then in May 2023, the city’s high court released a new action plan to improve the overall business environment, a plan that is modeled partly on the Work Bank’s new Business Ready (B-READY) model for assessing the business environment of cities and countries around the world.
The release of these documents points to a broader effort of Shanghai to present itself as the top destination for foreign businesses in the Chinese mainland and to transform itself into one of the most business-friendly cities in the world.
Measures for attracting foreign investment
The foreign investment measures do not introduce any new specific policies for attracting FDI or supporting foreign businesses, but they do propose several courses of action to guide local authorities toward policy implementation.
The measures are split into four main categories, which can be broadly characterized as measures to improve market access, channel FDI into key industries, expand support and resources for foreign-invested projects, and improve services geared toward foreign businesses.
The proposed strategies are summarized in the table below.
Potential expansion of market access
The foreign investment measures suggest that Shanghai is considering loosening access to certain industries that have been off-limits to foreign investors. China manages the market access for foreign companies through the Negative List for Foreign Investment Access, which industries foreign companies are prohibited or limited from investing in.
Among the industries that are included in the negative list are telecommunications and internet services. On a national level, foreign investors were limited to 50 percent ownership of value-added telecom services and 49 percent for basic telecom services until recently. In April 2022, the Chinese government relaxed rules over foreign ownership in the telecom industry, allowing a majority foreign stake or even 100 percent ownership for certain telecom sectors. Several regions in China had already experimented with lifting the limitations on foreign ownership of certain types of telecom businesses prior to this date, including the Shanghai FTZ.
However, foreign investors are still prohibited from investing in online news, publishing, audio-visual programs, culture (except for music), and information dissemination services, (except for those that are required to be open under China’s WTO commitments).
The foreign investment measures call to “implement pilot programs to expand access to industries such as telecommunications, internet, education, culture, and healthcare” therefore could mean further market access expansion for foreign investors, at least on a limited pilot basis.
Read More at https://www.china-briefing.com/news/shanghai-fdi-new-measures-to-attract-foreign-investors/
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