The 11th Five-year Plan on Foreign Capital Utilization (2)
Source: SDRC View: 553 Date: 2011-05-16

After making a summary of the domestic and foreign situations, it can be preliminarily concluded that, during the11th Five-year Plan, the foreign capital utilization of China will have the following new changes: in respect of regional structure, with the rising of the cost of production factors in the Eastern Regions, the Central and Western Regions will face very good opportunities in utilizing foreign capital, and the smooth going of echelon transfer of foreign investments will become an important task of the Central and Western Regions in utilizing foreign capital. In respect of industrial structure, the 11th Five-year Plan will be an important period when China’s service industry is reformed and developed and the service industry, particularly modern service industry, becomes an industry to which foreign investments will speed up to enter. In respect of investment scale, the cost of foreign investments will be increased, and the speed of increase of foreign investments during the 11th Five-year Plan will be heavily influenced due to the tendency of saturation of investments in domestic traditional manufacturing industries, the rise of the cost of domestic factors, and the restrictions on energies and resources.. In respect of the foreign capital utilization methods, the credit standing of the state and that of enterprises will be improved constantly, the reforms of formation mechanism of Renminbi exchange rate and of other related systems will be propelled constantly, and the foreign exchange reserves with a large scale and the increasing development of domestic investment banking industry have created conditions for China to utilize foreign capital and to reduce financial risks in multiple ways. The layout of domestic traditional industries has been completed basically, and both the building up of new investment projects and the merger and acquisition of enterprises will become important modes of foreign direct investments.

During the 11th Five-year Plan, the guiding ideology of foreign capital utilization of China shall be: To take Deng Xiaoping Theory and the important thoughts of "Three Represents" as the guide, to comprehensively carry out the scientific view of development, and to actively and effectively utilize foreign capital; to make an overall plan for domestic development and the opening up to the outside world, to properly deal with the relationship between the foreign capital utilization and the balance of international payments, that between utilizing foreign capital and making the best use of domestic funds, to promote adjusting and optimizing the structure of domestic industry and regional economy, as well as to conscientiously improve the quality of foreign capital utilization; to propel the construction of an opener independent innovation system, to intensify the integrated innovation ability and the re-innovation ability to import, digest and absorb; to, in the process of further opening to the outside world, actively defend and eliminate various risks, and to conscientiously guarantee the state economic security; to further reinforce, exert and create the comparative advantages of China, to carry out the opening strategy for mutual benefit and common wins, and to actively take part in international economic and technological cooperation and competition within a larger scope, in wider areas and at a higher level.

During the 11th Five-year Plan, the overall strategic objective of foreign capital utilization of China shall be: To further propel the fundamental conversion of foreign capital utilization from "being quantity oriented" to "being quality oriented", to conscientiously transfer the emphasis of the foreign capital utilization from making up the shortage of funds and foreign exchanges to introducing advanced technologies, management experiences and high-quality talents, and to focus more on ecological construction, environmental protection, conservation and comprehensive utilization of resources and energies. By way of introducing foreign advanced technologies and management experiences, we shall exert the functions of leading and eradiating of foreign-funded enterprises to domestic enterprises, promote the improvement of the integrated innovation ability and the re-innovation ability to import, digest and absorb of China; we shall strive for the further extension of foreign investments from the simple processing, assembly, and the production and manufacturing at a low level to research, development, high-end design, modern circulation and other new areas, propel China to become one of the manufacturing bases of high value-added products in the world; we shall greatly improve the level of opening up to the outside world in the service industry; we shall markedly improve the scale, quality and level of foreign capital utilization in the old industrial bases in the Central and Western Regions and those in Northeastern Regions, further intensify the Eastern Regions’ economic globalization extent and international competitiveness; we shall utilize foreign preferential loans actively, reasonably and effectively, focus more on their quality and returns; we shall strengthen the control of the structure and purposes of foreign debts, strictly prevent the risks of foreign debt; the total scale of foreign capital shall grow steadily on the basis of the 10th Five-year Plan; up to 2010, the system of foreign capital utilization management shall be more reasonable and effective, and the foreign capital utilization shall be more harmonious with domestic economic and social development.

3. Major Tasks of Foreign Capital Utilization of China during the 11th Five-year Plan

(1) Guiding the industrial structural optimization and upgrading of foreign investments

Foreign investors shall be encouraged to invest in and develop modern agriculture, to concentrate on developing ecological agriculture and the planting and breeding industries with high technology content and high added value, to concentrate on comprehensively utilizing agricultural wastes, developing biological mass energy, developing and manufacturing modern agricultural mechanical equipment, and deeply processing of agricultural products, as well as to introduce modernized agricultural technologies and management modes.

We shall encourage foreign investors to continue the investment in electronic information industry, petro-chemical industry, chemical industry, and automobile industry, and so on. They shall, on the basis of requirements for China’s industrial upgrading of the heavy chemical industry, appropriately increase foreign investment projects including the large petro-chemical industry and chemical industry, and so on. We shall particularly encourage the projects in which self-balance of resources can be realized, and foreign advanced technologies shall be introduced by ways of joint venture cooperating and other ways. The automobile manufacturing industry shall, when continues doing a good job in upgrading the joint venture enterprises’ products and improving the joint venture enterprises’ market competitiveness encourage foreign capital to be mostly contributed to automobile design, the building up of research and development centers, and shall continue encouraging foreign capital to be contributed to develop the manufacturing of professional automobile parts and components with high technology content.

We shall encourage foreign capital to continue to be used in reorganization and reform in mechanical industry, light industry, industries concerning textiles, raw materials, construction and building materials, and other traditional industries, as well as be contributed to improve enterprises’ technical level and product class, and to enhance enterprises’ international competitiveness. We shall reform domestic traditional industries by ways of introducing advanced applicable technologies, equipment and management experiences, bring in foreign investments to develop labor-intensive industries with comparative advantages of China and export processing industry, and to promote the development of the medium and small enterprises featured as "professional, specialized, unique, new and excellent". Foreign capital shall be led to be used in the energy source area so as to accelerate exploring, exploiting, utilizing domestic petroleum and natural gas as well as building up the transporting pipelines, and the development of redeemable energies shall be sped up.

We shall continue encouraging foreign capital to invest in the building up of infrastructures. Foreign investments shall be actively utilized to speed up the construction of the traffic projects such as highways, ports and railways, as well as the urban infrastructures such as track traffic, water supply, gas supply, heat supply, sewage and garbage treatment, and so on, and particularly be encouraged to be invested in urban infrastructure construction in the old industrial bases in the Central and Western Regions and those in Northeastern Regions, and in the development of the succeeding industries in resource-exhausted cities.

(2) Promoting the construction of a resource-conservative and environment-friendly society

We shall intensify the policy guidance of resource conservation and environmental protection to the foreign capital utilization, and strictly restrict foreign-invested projects at a low level, with high consumption and high pollution; we shall encourage the conservation of water, land and materials in foreign capital utilization, strengthen comprehensive utilization of resources, and encourage the introduction t of advanced applicable process, technology and equipment which may effectively conserve energy and reduce consumption through foreign capital utilization.

We shall actively propel the foreign capital utilization in areas of environmental protection, and propel the carrying out of key projects of environmental protection engineering. We shall intensify comprehensive prevention and control of pollution caused by foreign-invested enterprises such as water pollution, air pollution and solid waste pollution, and so on, and effectively control the pollutant discharge. Foreign investors shall be encouraged to invest in recycling and utilizing waste metal, worn tires, waste electronic products and other industrial wastes as well as utilizing household garbage and sludge as resources. We shall speed up the development of the building up of ecological environments in the Central and Western Regions, and encourage foreign investors to invest in biological mass-energy conversion projects and clean energy projects.

(3) Propelling the opening up of service industries to the outside world actively and steadily

The opening up of the banking industry to the outside world shall be in line with the principles of progressing in order, supervising prudentially and controlling risks. We shall keep a reasonable structure and layout of both Chinese-invested banks and foreign-invested banks within the territory of China. We shall, on the premise that the Chinese party controls the shares, allow domestic commercial banks to bring in foreign strategic investors. We shall actively support the establishment of strategic partnerships such as stock right cooperation, etc. between foreign-invested banks and Chinese-invested banks, and shall improve the corporate governance structure. We shall encourage both Chinese-invested and foreign-invested banks to cooperate in terms of financial products, work skills, information exchange, resource sharing and trainings, etc., introduce advanced business operation philosophy, operational modes and senior management talents of the modern banking industry, and to promote the conversion of domestic commercial banks’ mechanism.

The insurance industry shall carefully fulfill the China’s promises on entry into WTO, lay emphasis on bringing in overseas insurance companies and other financial institutions which are specialized in the areas such as pension, medical treatment, liability and agricultural insurance, and so on, and we shall encourage foreign-invested insurance companies to conduct business by setting up business institutions in the Central and Western Regions and in Northeastern Regions. We shall, on the premise that the Chinese party controls the shares, allow State-owned insurance companies to bring in foreign strategic investors, and allow qualified domestic joint stock insurance companies to bring in foreign investments. They shall, through foreign capital utilization, speed up the introduction of foreign advanced insurance products, operational modes and senior management talents, so as to enhance insurance industries’ competitiveness of China.

We shall propel the opening up to the outside world of the securities industry in an orderly way and step by step, and shall continue bringing in foreign investors, promote securities business institutions to improve their corporate governance structure, to strengthen their internal risk control and management, and to enhance their management level on the basis of the principle of prudentially supervising; as well as to speed up the industrial integration, product and service innovation. We shall allow listed enterprises to bring in strategic investments from overseas strategic investors after finishing the share-trading reform.

The telecommunication industry shall be steadily and orderly opened to foreign investors. It shall be done strictly according to China’s promises for entry into WTO. Foreign investors shall be allowed to run domestic telecommunication business within the statutory scope through joint venture, the proportion of foreign investments in the market of the value-added telecommunication service may be enlarged, and the opening up of the basic service market shall be propelled prudentially. The policy system on the opening up to the outside world of the telecommunication industry shall be improved.

The commercial sector shall lay emphasis on the improvement of the foreign investment absorption level. It shall, by aiming at the introduction of business operation philosophy in modern commerce, foreign advanced distribution methods, marketing network and service means as the objective, keep a proper increase of the number of foreign-invested commercial retail enterprises, and develop foreign-invested commercial wholesale enterprises, large chain stores and distribution centers in an orderly way. Large domestic commercial enterprises shall be supported to optimize the structure by bringing in foreign capital, and to improve the management level, as well. We shall closely focus on the affects of foreign investments to the commercial development of China, conscientiously do well in supervision over anti-trust and fair trading, and keep the Chinese-invested and foreign-invested commercial enterprises’ reasonable layout, market shares and structure in large and medium cities.

Large foreign logistics enterprises shall be encouraged to set up logistics enterprises in China in light of related provisions of the laws and regulations of China, and shall be encouraged to utilize foreign funds, equipment and technologies, and to take part in constructing and operating domestic logistics facilities.

We shall actively propel the foreign capital utilization in the tourism industry. We shall utilize foreign capital to improve tourism facilities, to protect and develop tourism resources, to attract overseas tourists, and to improve the management. We shall encourage the wider opening up to the outside world in the industries of transport, construction, legal service, accounting service, consulting, etc. through Chinese-foreign joint venture, Chinese-foreign cooperation, and so on. Foreign investments shall be actively and steadily promoted to contribute to the cultural area, including distribution of audio and video products, operation and brokerage of performance places and cultural products, etc. State cultural security shall be maintained, too.

(4) Promoting the construction of an opener independent innovation system

Foreign investors shall be encouraged, particularly large transnational companies, to transfer the processing and manufacturing techniques with higher technical level and higher value-added content as well as their research and development institutions to China, and transnational companies shall be encouraged and attracted to set up bases of production and manufacturing, auxiliary, service outsourcing, and training in China and to exert technology spillover effect, so as to promote enhancing Chinese enterprises’ capacity of independent innovation.

We shall exert functions of strategic guidance and comprehensive coordination of the government, encourage foreign enterprises, particularly transnational companies, to transfer advanced technologies to China by means of setting up joint venture enterprises, cooperative production, united manufacturing, and so on. Technical exchanges shall be promoted between foreign-invested enterprises and domestic enterprises, the corporation on scientific research and technological development shall be encouraged between foreign companies and domestic hi-tech enterprises, and Chinese-foreign joint venture and cooperation in major hi-tech areas shall be actively propelled.

Foreign investors shall be encouraged and leaded to invest venture capital in China, utilize foreign capital to speed up the development of the venture capital service system of China, and promote the establishment of a group of domestic venture capital enterprises with strong independent innovation capacity, flexible mechanism and high internationalization level. People with overseas education background and overseas Chinese professionals shall be encouraged to come back to China to set up hi-tech enterprises.

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