Foreign investment into China continues to grow this year with October the ninth straight month of rises in inward FDI, according to the Ministry of Commerce. And this continued rise might be bolstered by reforms announced at the Communist Party of China’s Third Plenary Sessions, or Third Plenum, in November.
A spokesperson for China’s Ministry of Commerce said that FDI policies will remain transparent and predictable, and standardisation of laws will increase. There will also be a lifting of controls on a number of industries, including finance, education, culture and medical care, as well as opening up in sectors such as architecture, accounting, logistics and e-commerce. These are all areas where US and European companies in particular have strong expertise, and may lead to an even greater increase in inward FDI.
While these measures are fairly routine and in line with China’s opening up in recent years, there are also a number of more significant shifts suggested. There will be a shift from looking merely at the scale of an investment to also analysing the potential for improved quality and technical expertise that a particular investment might bring. This paves the way for smaller, more innovative investments in China’s growing high-tech markets.
Perhaps the greatest information to be gleaned from the Third Plenum, however, is the seeming commitment to market competition. The new Shanghai Free Trade Zone, the pilot for foreign investment, allows investors to enter any industry apart from those on the ‘negative list’. If successful, this could see a roll-out across the country of a liberalisation of the services industries, allowing a far greater level and scope for FDI.
However, despite this optimism and the potential softening of barriers to investment, few particulars were actually laid out in the official documents. Outside of creating two new organs of power to push forward reforms and to coordinate security strategy, there were few surprises or concrete policies. So while the future does show great potential and FDI is likely to continue to rise each month, the pace of liberalisation will likely remain slow and steady. Soon, however, it could benefit consumers as pricing options and service choices in areas such as utilities, telecommunications and banking increase with further investment and opening up.