The 11th Five-year Plan on Foreign Capital Utilization (3)
Source:  View: 549 Date: 2011-05-16

(5) Promoting harmonious regional economic development

The eastern coastal regions shall, as the most important regions on foreign capital utilization, continue exerting the advantages in various terms such as highly export-oriented economy, sufficient funds and talents, advanced technologies, good locations, and strong auxiliary capacity, so as to be the first to realize the conversion of the foreign capital utilization from "being quantity oriented" to "being quality oriented". They shall try to improve independent innovation capacity, speed up realizing the optimization and upgrading of structure as well as the change of growth mode, and enhance their international competitiveness and sustainable development capacity. We shall fully exert the foreign investments’ eradiating and driving functions in coastal areas such as the Pearl River Delta, the Changjiang Delta, and the Bohai Sea Rim Region to other regions, and shall, endeavor to develop fund-intensive and technology-intensive industries, hi-tech industries and modern service industries, and improve the technical content of foreign-invested projects, as well on the premise of stressing intensive utilization of land; we shall also strengthen the intra-regional industrial structure optimization, and realize a rational labor division with all the regions exploiting their own particular advantages for mutual benefit. The big cities in coastal regions shall make important progress in opening up to the outside world in the service areas in terms of banking, insurance, commercial, and telecommunication, and so on. .

The active utilization of foreign capital is an important content of propelling the grand western development program, vigorously developing old industrial bases in northeastern regions or elsewhere, and promoting the strategy of Rising in the Central Regions. We shall clarify different regional positioning, and fully exert the driving and eradiating functions of central cities based on the loading capacities of resources and environment, development advantages and development potentiality. We shall seize the opportunities of the transfer of the international manufacturing industry and the transfer of foreign capital from eastern coastal regions, strive to promote the echelon transfer of foreign capital to the old industrial bases in the Central and Western Regions and those in the Northeastern Regions, try to extend the scale of foreign capital utilization of the old industrial bases in the Central and Western Regions and those in Northeastern Regions, speed up the development of the characteristic enterprises with good industrial base, resource advantages and competition advantages in the old industrial bases in the Central and Western Regions and those in the Northeastern Regions, and so on.. Foreign investors shall be encouraged to enlarge investments to the service industries in the old industrial bases in the Central and Western Regions and those in Northeastern Regions, and so on, and a policy inclination shall be given lawfully in terms of market access qualification, access procedures, business scope, and so on.

(6) Realizing diversification of the methods of foreign capital utilization

The foreign direct investments shall be continuously considered as the key point of the work of foreign capital utilization, and a large scale in utilizing foreign direct investments shall be maintained. Continuously, foreign investors shall be actively attracted to set up new enterprises in China, and the existing foreign-invested enterprises shall be encouraged to re-invest with profits. We shall also exert the driving functions on domestic economy of the new enterprises set up by foreign investors in respect of employment promotion, technical progress, and industrial structural adjustment, and so on.

We shall,according to requirements for the state industrial structural adjustment and the enterprise reform, lead foreign investors to take part in domestic enterprise reorganization and reform by means of merger, acquisition, share purchase, re-investment, etc., so as to actively probe into the effective form of revitalizing state-owned assets based on maintaining the state’s control and development domination over some key industries and key areas. Except for the key areas and key enterprises concerning state security, we shall gradually loosen the restrictions on the foreign investors who control other enterprises or areas’ shares. We shall propel the private enterprises’ investment to cooperate with foreign investors, and promote and enhance the private economy’s overall level and international competitiveness of China.

Transnational companies shall be continuously encouraged to invest in China to set up various operation centers and production bases such as regional headquarters, centers for research and development, purchase centers, training centers, and so on; they shall be encouraged to intensify their strategic cooperation with the China’s local enterprises, be promoted to be more localized and to be better integrated with the economy of China; be encouraged to transfer and proliferate more technologies to local enterprises of China, and be prevented form controlling or monopolizing key industries and areas of China.

We shall strive to strengthen the absorption of foreign capital by utilizing securities investments and investment funds, etc., continue supporting the listing of domestic enterprises outside the territory of China. We shall improve the mechanism for enterprise operation under international rules, and shall extend the scale of foreign capital utilization through share rationing or capital increasing, etc. according to requirements for enterprise development. We shall support large domestic enterprises that meet the requirement to grasp good opportunities in the international capital market to issue securities in Hong Kong and other overseas stock markets and bonds markets for raising funds. We shall continue strengthening and regulating the administration of domestic enterprises in terms of issuing stocks or listing outside the territory of China, and using funds, etc., so as to set up the Chinese enterprises’ good image in international capital market.

We shall optimize the structure of origin of foreign capital, actively extend the scale of investments in China which are from developed economies with advanced technologies and management experiences, such as Europe Union, North America, Japan, and try to improve the proportion of investments in China which are form such developed economies.

We shall lay emphasis on absorbing capital from Taiwan, and continue applying the policies of "giving priorities under equal conditions, and properly loosening" to Taiwan investors that invest in the Mainland. We shall actively propel the implementation of the Closer Economic Partnership Arrangement of Mainland/Hong Kong and Mainland/Macao, encourage investors from Hong Kong and Macao to add their investments in the Mainland, and further intensify and deepen the economic connections of Mainland/Hong Kong and Mainland/Macao. Overseas Chinese investors shall be encouraged to invest in the Mainland.

(7) Improving the quality and returns of foreign loan utilization

Foreign preferential loans shall be borrowed actively, reasonably and highly-efficiently. We shall keep foreign preferential loans in a certain scale, and at the same time, care the social returns and economic returns of foreign loan utilization; we shall attach importance to the absorption of advanced international technologies, management experiences and knowledge philosophy, exert the functions of the loan projects in demonstrating and driving, and improve the quality and returns of the loans.

The contribution of foreign preferential loans shall be optimized to selected areas. More prominence shall be given to resource conservation, environmental protection, ecological construction, new countryside construction, harmonious development of urban and rural areas and harmonious regional development, and we shall lay emphasis on supporting traffic infrastructure construction, urban infrastructure construction, environmental protection, resource protection and ecological construction. We shall, appropriately offer more support in the social development areas such as education, public health construction, rural and urban drinking water safety, and community services, etc. on the premise of reducing the cost of loans. The Central and Western Regions shall be given an inclination to, and the investment environment shall be improved. The loans used in the Central and Western Regions and in the Northeastern Regions shall account for 80% of the total foreign preferential loans or more.

There shall be innovations and breakthrough in the methods of foreign preferential loan utilization. We shall further probe into the effective channels of combining foreign preferential loans with related domestic funds, and research the approach of combining the utilization of central budgetary funds and treasury bond funds with the utilization of foreign preferential loans on the premise of sticking to stressing project loans.

The scale of international commercial loans shall be extended properly. We shall fully take into account the situation of the domestic supply of Renminbi and foreign exchange funds, the exchange rate alteration tendency and the comprehensive cost and risks of financing in international capital market, and shall offer support to domestic enterprises and financial institutions meeting requirements to finance and speed up development through raising funds in international capital market, issuing foreign currency bonds within the territory, and financial lease, etc. International commercial loans shall, according to the requirement of domestic industrial policies and structural adjustment and optimization, be mainly used to support the development of the industries such as finance, civil aviation, petro-chemistry, chemical industry, electronic information, advanced manufacturing industry, etc; in respect of purposes, the loans shall be used to introduce advanced technologies and equipment. We shall probe into utilizing foreign funds to improve the building up of the system of domestic credit, enhance the guaranty companies’ guaranty capacity, and improve the private enterprises’ financing environment. As for the international development institutions such as International Finance Corporation and Asian Development Bank issuing Renminbi bonds within the territory of China, we shall, based on the experiments made during the period of the 10th Five-year Plan, summarize experiences and develop steadily.

(8) Intensifying the macro-monitoring and full- aperture administration of foreign debts

We shall, with regard to the adjustment of foreign debt administration aperture, the emergence of Renminbi foreign debts and the gradual establishment of classified management bylaws for policy banks and commercial banks and the modern enterprise system, research to work out related policies, effectively control the total scale of the state’s foreign debts, and control the main indices of China’s foreign debts such as the debt service ratio, foreign debt ratio, etc. to be within the internationally accredited safe line. We shall maintain the reasonable term structure and currency structure of foreign debts, and reasonably control the short-term foreign debt scale. We shall improve the monitoring and pre-warning system of foreign debt, earnestly intensify the overall administration of foreign debts, intensify the analysis of exchange rate risks and other foreign debt risks, and enhance the capacity of preventing foreign debt risks.

4. China’s Policy Measures on Foreign Capital Utilization during the 11th Five-year Plan

(1) Constructing a fairer and sounder environment for foreign investments.

We shall, according to the requirement for the development of the socialist market economy of China and the opening up to the outside world, research to work out laws and policies on promoting foreign investments, amend and promulgate a uniform Enterprise Income Tax Law applicable to both domestic and foreign enterprises, amend and improve the legal systems on strengthening foreign exchange administration, and further improve the legal system concerning foreign interests, which satisfies the need in socialist market economy.

We shall reduce administrative examination and approval matters of the government, regulate and simplify procedures for handling matters conscientiously and lawfully, and create a fair and foreseeable policy environment for enterprise development. We shall actively propel the building up of EDI-based customs clearance, and endeavor to improve the clearance efficiency. We shall intensify the legislation and law enforcement on intellectual property protection, severely combat tortious acts, and earnestly guarantee Chinese and foreign intellectual property owners’ lawful rights and interests. We shall strengthen the building up of the system of basic social credit, improve the bylaws on punishment of discredit, and construct an honest and credible society.

We shall speed up the construction of a full-aperture foreign investment statistical system including foreign investments (containing foreign direct investments and other investments of foreign investors) and foreign loans, completely monitor and accurately reflect the trends of foreign investments, promulgate the statistical data on foreign investments to the public in a timely and entire manner, and provide a better base for decision-making. We shall continue focusing more on the compacts of the reform of Renminbi exchange rate system to the foreign capital utilization, and provide corresponding measures in a timely manner. We shall further improve the management of capital and financial projects, and steadily propel the convertibility progress of Renminbi capital accounts. We shall closely focus on the trends of international capital flows and the policy changes on foreign capital utilization from key countries, promulgate responding policies in a timely manner, and maintain the attraction of China to high-quality and high-level foreign investments.

(2) Intensifying the policy guidance to foreign investment industries and to the contribution thereof to selected regions

We shall, according to the development and changes of the economic situation, dynamically adjust the Catalogue for the Guidance of Foreign Investment Industries, further widen the opening up to the outside world, propel the optimization and upgrading of the industrial structure, conserve resources, protect environment, and prevent the blind investments and excessive production capacities in some industries. Related provisions concerning the regulation of the development of processing trade shall be worked out, the mechanism for processing trade investment shall be improved, and the transformation and upgrading of the processing trade shall be promoted. The Catalogue of Imported Commodities for Foreign-invested Projects Not Exempted from Tax shall be amended, and the gap of the tax exemption treatment between domestic and foreign-invested enterprises on equipment import shall be further reduced, so as to apply uniform taxation policies on equipment import finally.

We shall strictly abide by China’s promises for entry into WTO, work out and promulgate related provisions concerning the promotion of the foreign capital utilization in the service industry, and enlarge the areas for foreign capital utilization in the service industry. We shall research to gradually loosen the policies on restrictions on foreign investments in the service area in terms of territory, stock rights and business scope, etc., actively and steadily propel the opening to both domestic and foreign investments of monopolizing industries and areas in a uniform and orderly way. We shall work out the administrative measures for further regulating the development of overseas institutions and investment of real estates within the territory of China, and prevent short-term international capital from greatly influencing the economy and finance of China via the real estate industry.

The Catalogue of Priority Industries for Foreign Investment in the Central and Western Regions shall be amended, and the contribution of foreign investments in the Central and Western Regions shall be effectively led. Related policies and detailed implementation rules shall be worked out on speeding up the opening up of the old industrial bases in the Northeastern Regions, etc., and the opening up of the Central and Western Regions, as well.

We shall further regulate the purchase of domestic stocks and bonds of foreign institutional investors who satisfy the condition, regulate the strategic investments of overseas institutions to the listed companies in China, improve related administrative measures, and shall, when speeding up the opening up to both China and the outside world of the capital market, lead an orderly and controllable flow of securities investments funds.

(3) Intensifying the implementation of resource conservation and environmental protection

The access standards for foreign-invested projects shall be worked out in terms of energy consumption, water consumption, land occupation, etc, and bylaws on compulsory elimination of energy-consumptive and water-consumptive outdated process, technologies and equipment shall apply to various enterprises including foreign-invested enterprises. Various types of environmental protection supervision shall be strengthened over enterprises including foreign-invested ones, the law enforcement efforts shall be intensified, and the bylaws on clean production examination, environmental marks and environmental certification shall apply. We shall research to work out comprehensive encouragement policies on offering support to foreign-invested environmental protection industries, speed up the progress of market-based pollution treatment. We shall research to work out regular access policies on foreign-invested exploration and exploitation of mineral resources, reinforce the access conditions for foreign-invested exploration and exploitation of mineral resources. We shall work out and improve related policies concerning the encouragement of foreign investors to invest in water conservation projects, energy conservation ones, material conservation ones, to strengthen comprehensive resource utilization, and to transfer advanced technologies.

(4) Guiding various forms of technical cooperation and united innovations of domestic and foreign-invested

We shall work out and promulgate comprehensive encouragement policies on leading foreign investors, particularly, large transnational companies, to transfer their high-end processing and manufacturing techniques as well as research and development institutions to China, so as to encourage transnational companies to set up bases of production, manufacturing, auxiliary, service and training in China. We shall also work out auxiliary policies on encouraging foreign-invested enterprises to carry out research and development cooperation with domestic enterprises, so as to better exert the foreign-invested enterprises’ technology spillover effect.

We shall improve policies on tax exemption of equipment imported for foreign-invested projects, and encourage foreign-invested projects to purchase more domestic advanced equipment and technologies, so as to create a better market environment for the complete sets of domestic equipment and advanced applicable technologies, and to promote the development of the equipment manufacturing industry of China. We shall, when strengthening intellectual property protection, make full use of international experiences for reference, work out rules and policies concerning the prevention of transnational companies from abusing intellectual properties to restrict the independent innovations of China, and shall enhance our capacities of actively taking part in working out intellectual property rules.

We shall improve the administrative provisions on encouraging and regulating foreign investors to conduct venture investment in China, speed up the promulgation of related auxiliary policies, use international successful experiences in venture investment for reference, and improve the mechanism for foreign investors’ contribution and withdrawal of venture capital. We shall set up and improve policies and bylaws on encouraging people with overseas education background and overseas Chinese professionals to come back to China to set up hi-tech enterprises, and work out related auxiliary policies in respect of taxation, entry, exit, and work permit, etc. on attracting overseas high-level talents to invest and work in China.

(5) Further strengthening the foreign loan borrowing administration

We shall continue improving the administration of foreign preferential loans, the regulation of the procedures for examination, approval and use of loans, the development of the loan re-lending mechanisms, and the improvement of the work efficiency and fund use efficiency. We shall, in accordance with the guideline of harmonious social and economic development, broaden new loan areas and exploit new loan methods so as to meet the needs in the continuous economic and social development. We shall strengthen coordinating and cooperating with multi-lateral and bi-lateral foreign loan-granting institution, and advocate active interaction based on the constant absorption of their experiences and technologies.

We shall practice the promotion of specific measures for foreign preferential loan utilization in the Central and Western Regions as well as in the Northeastern Regions, offer support in respect of loan proportion, auxiliary funds and auxiliary policies, and give inclination in terms of lending plans. The active functions of foreign loans in regional economic cooperation shall be fully exerted, and the economic growth and social construction in border areas shall be propelled so as to create conditions for strengthening the economic cooperation with the surrounding countries and regions.

The related provisions for international development institutions to issue bonds as well as to make stock right and credit investments within the territory of China with the funds financed by issuing bonds shall be amended and improved, the administrative measures for Chinese enterprise to issue foreign currency bonds within the territory of China shall be worked out and improved, as well as the opening and development of domestic bond markets shall be regulated and supported. The administrative measures for regulating foreign-investment-involved disposal of non-performing assets shall be further improved, the efficiency of non-performing asset disposal shall be improved, and the healthy and orderly development of non-performing asset disposal market of China shall be promoted.

(6) Improving the level of the monitoring, control and management of foreign debt risks

We shall further improve the pre-warning system of foreign debt risks, enrich and improve the indices of the foreign debt monitor. We shall effectively control reasonable foreign debt structure and the use orientation, intensify the administration and monitoring of the foreign debts of foreign-invested enterprises, the foreign debts of the overseas institutions set up by Chinese enterprises, and China’s contingent foreign debts , and shall intensify the efforts of the control on the short-term foreign debts, so as to combine the administration of the foreign debt with that of the foreign exchange organically, and to guarantee the safety of the balance of international payments.

We shall strengthen the macro-guidance on foreign debt risk management of domestic enterprises, regulate the use of various forms of derivative financial instruments, strengthen the administration of the contingent foreign debts arising out of derivative products, and promote the domestic market of derivative financial products to develop healthily.

We shall further reform the management mode of the foreign debt, and conduct classified administration to different financing entities. We shall propel the national treatments on the administration of foreign debt of both domestic and foreign-invested enterprises, and effectively monitor and control overseas enterprises’ foreign debt risks. We shall research to provide new modes of total amount control and overall administration of international commercial loans.

(7) Maintaining state economic security and public interests

We shall speed up the promulgation of the Anti-trust Law, strengthen the efforts in anti-trust work, and maintain a market order of fair competition. We shall further detail the policies for sensitive industries concerning national economy, people’s livelihood or state security, and improve the foreign-invested industry access system; we shall strengthen examining and supervising the foreign-invested merger and acquisition of key enterprises in the sensitive industries concerning state security, and guarantee the controlling force over the strategic industries and key enterprises concerning state security, national economy or people’s livelihood, and ensure the domination over the development thereof. We shall lay emphasis on the wholly-owned foreign enterprises’ effect on the economic security of China, particularly industrial security, and set up a reasonable evaluation and pre-warning system. We shall strengthen taxation regulation, and prevent foreign-invested enterprises from transferring profits through transfer pricing or associated transactions, and so on.

We shall set up a reasonable mechanism for the evaluation of enterprise asset which meets the requirements for international practices, and prevent the damage of domestic assets and interests in the process of foreign-invested merger or acquisition; we shall, in the process of capital increase to a joint venture enterprise, maintain the reasonable interests of the Chinese party under law, and guarantee the lawful rights and interests of the merged or acquired enterprise’s employees ; we shall firmly stop investment canvassing acts which damage China’s interests such as low-price land assignment, and shall continue intensifying the administrative enforcement supervision system over foreign-invested enterprises.

We shall take effective measures to strictly regulate the policies on foreign capital utilization of all localities and all departments, and keep the consistency with the state laws and regulations and solemnity of local and departmental regulations or policies. Each locality shall absorb foreign capital by mainly depending on its own advantages and good environment for investment, and shall not unlawfully reduce or exempt taxes or promulgate other preferences against the state policies or regulations. We shall continue reforming and improving the methods of canvassing investments, fully exert the enterprises’ functions as market roles, and more frequently adopt the new investment canvassing methods such as public bidding invitation, canvassing investments on network, and so on, so as to avoid the blindness and excessive administrative intervention in investment canvass, and to improve the actual effects of investment canvass.

(8) Actively taking part in formulating and coordinating the international economic rules

We shall earnestly face the new round of WTO negotiations, propel the bilateral and regional cooperation of economic and trade actively and steadily, speed up the development of the multi-lateral and bilateral investment cooperation relations, and establish a mechanism for promoting the investment cooperation with key countries, so as to create an external environment which may be beneficial to China in the absorption of foreign investments.

(All information published in this website is authentic in Chinese. English is provided for reference only.)

Devott Publications
The Selection of the TOP Global Outsourcing Destinations – China TOP 15 (TGOD China TOP 15) Ended and Its Rankings and Research Reports are Now Available Worldwide