The current accelerated reconfiguration of global production and value chains has made foreign investors more cautious. A report released by the United Nations Conference on Trade and Development shows that global FDI has lagged behind the pace of global GDP and trade growth, falling by more than 10 percent for two consecutive years.
With the lack of momentum in the global economy, China — as a major developing country absorbing and utilizing FDI — is also facing challenges in attracting investment. According to the Ministry of Commerce, in the first 10 months, China’s actual utilization of foreign investment amounted to 693.21 billion yuan ($95.14 billion), down 29.8 percent year-on-year. Against this backdrop, the policy to deepen reform of the foreign investment management system announced during the third plenary session of the 20th Central Committee of the Communist Party of China is being implemented at an accelerated pace, and a series of new regulations to optimize the level playing field and expand foreign investment access have recently been introduced.
First is the introduction of new government procurement regulations to optimize the level playing field and give foreign enterprises equal opportunities to participate. According to the decision made during the session, foreign-funded enterprises shall be guaranteed national treatment in terms of access to factors, qualification licenses, standard setting, government procurement and other areas, and shall be encouraged to participate in upstream and downstream supportive collaboration in the industrial chain.
On Dec 5, the Ministry of Finance issued the notice on matters relating to the standards and implementation policies for domestic products in the field of government procurement (draft for public comments) to implement the requirement. The document clarifies the specific standards for domestic products in government procurement. The provisions of the domestic products are divided into two categories:
General products — as long as they are produced in China and the cost of domestically produced components reaches the prescribed proportion of the requirements.
Specific products — in addition to meeting general product requirements, they must also meet the requirement that key components be produced in China and key processes be completed in China.
Domestic products enjoy a 20 percent preference over nondomestic products in government procurement. In terms of scope, it mainly applies to the procurement of goods involved in government procurement of goods and services. In terms of scope of application, this includes goods and services involved in government procurements themselves.
Previously, some foreign-funded enterprises in China had suggested that relevant government authorities clarify the definition of “domestic products” so that they would not miss out on business opportunities when participating in government procurement activities due to the unclear definition of “domestic products”. The introduction of this policy fully demonstrates the Chinese government’s commitment to ensuring equal participation and national treatment for domestic and foreign enterprises in government procurement.
Also, China has eased restrictions on foreign investment in telecommunications and healthcare, allowing greater foreign participation. This year, China has accelerated the pace of orderly market access liberalization in telecommunications, medicine and other sectors. In April, the Ministry of Industry and Information Technology began pilot programs to expand the opening-up of value-added telecommunications services to the outside world, taking the lead in Beijing, Shanghai, Hainan province, and Shenzhen, Guangdong province, to implement pilot programs to remove foreign ownership restrictions on internet data centers, content distribution networks, internet service providers, online data processing and transaction processing services.
In the medical field, after the issuance of the circular on the pilot work of expanding opening-up in the medical field in September, the National Health Commission, in conjunction with the Ministry of Commerce, the State Administration of Traditional Chinese Medicine, and the National Disease Control and Prevention, issued the pilot program for expanding opening-up in the field of wholly-owned hospitals on Nov 1, which makes specific provisions on the conditions of the pilot program for the establishment of wholly-owned foreign hospitals (except for traditional Chinese medicine hospitals) in Beijing; Tianjin; Shanghai; Jiangsu province’s Nanjing and Suzhou; Fuzhou, Fujian province; Guangdong province’s Guangzhou and Shenzhen; and Hainan province.
Moreover, wholly foreign-owned hospitals are able to become designated institutions for basic medical insurance and conduct clinical trials of drugs if they meet the conditions stipulated in the law. According to the Statistical Bulletin of FDI in China 2024, the amount of China’s actual use of foreign investment in the field of health and social work in 2023 was $300 million, accounting for just 0.2 percent of the total, suggesting great growth potential.
China’s medical services market is one of the most dynamic and potential markets in the world, and opening-up to foreign investment is conducive to China’s ability to meet the increasing demand for multilevel medical services, and help achieve the goal of a “Healthy China”. The nine provinces and cities in this open pilot program not only have large populations, high demand for medical services and a good base of medical facilities, but also have a better business environment.
Finally, China issued the first central-level document on the market access system, providing more opportunities for foreign investors to participate in the domestic market. On Aug 21, the General Office of the CPC Central Committee and the General Office of the State Council issued the opinions on improving the market access system. This is the first time that China has issued a policy document on the market access system at the central level.
China has fully implemented its market access negative list system since 2018, and so far, after three revisions, the market access negative list items have been reduced from 151 in 2018 to 117 at present, with a reduction of about 23 percent in prohibited license items. With the gradual reduction of the market access negative list exclusively for foreign investors, for example, the number in the manufacturing sector has been reduced to zero. The national version of the negative list applies equally to both domestic and foreign investors. Therefore, the “one list” system for national market access promoted by the new regulations will further enhance the transparency of China’s market access and create more opportunities for foreign investors to participate in the Chinese market.
On the international front, the global economic environment remains complex and volatile. The overlapping effects of the COVID-19 pandemic, trade protectionism, geopolitics, climate change and other factors have exacerbated the fragmentation of the international business environment and increased the operational uncertainty of multinational enterprises, making it necessary for multinational enterprises to consider more risk factors when choosing investment locations.
At the domestic level, the government’s new foreign investment regulatory policy still faces the problem of striking a balance between maintaining national security and promoting economic development in the implementation process, i.e.realizing a benign interaction between high-quality development and high-level security.
The writer is a senior research fellow at the Institute of World Economics at the Chinese Academy of Social Sciences.
The views do not necessarily reflect those of China Daily.