China’s investment policy

Extract from remarks by OECD Secretary-General Angel Gurría on launch of OECD Investment Policy Review of China, Beijing, 21 March 2009

China's prime minister, Wen Jiabao (right), greets OECD Secretary General Angel Gurría at the China Development Forum in Beijing. March 2009.

“The Chinese government rightly advocates firm opposition to trade and investment protectionism, as emphatically stated by Premier Wen Jiabao on several occasions in the past few weeks. As it did a decade ago during the Asian crisis, China has set itself firmly against inward retrenchment in the face of economic downturn. We celebrate this commitment at OECD.

We have agreed that an open and reliable investment framework is one of the most important comparative advantages for any country. This crisis is an opportunity to improve these frameworks. As corporations reflect on how to adapt their investment decisions to the global recession, governments can take the opportunity to revise their investment policies, to take stock of achievements, but also to identify the pending challenges.(…)

The Chinese government has made massive strides in recent years to put in place the laws and rules to encourage responsible business conduct. And this is behind the remarkable growth of FDI (foreign direct investment) inflows during the last years.

Some of these steps include the regulations China adopted in 2006 on the acquisition of domestic enterprises by foreign investors, the enterprise income tax law that effectively abolished fiscal incentives for FDI from 2008, China’s first property rights law, the anti-monopoly law, and the latest revision of the catalogue for guiding foreign investment in industries.

China’s policies and laws on environmental protection are another good example of improvement. To prepare its review, an OECD team visited four textile factories in South China. They were all excellent examples of what can be done by enterprises that understand the importance of responsible business conduct.(…)

Important progress has also been made in energy conservation and in building a “circular” economy.

Labour laws have also developed rapidly and have become more transparent. A good example is the new Labour Contract Law.

These are all important achievements, but there is no space for complacency. There is still important work to be done. The Review has a few more recommendations to help China make better use of foreign investment.

National security screening procedures for foreign investment projects, for example, are still not transparent enough.(…)

More clarity on how the new Property Law will be applied is also important; especially for investors looking at the manufacturing sector.(…)

Working with the OECD and other partners to keep the global investment regime open will also help China’s FDI to play its part both in the global recovery and in China’s own development. I am glad that China has participated in the so-called Freedom of Investment process hosted by the OECD. This multilateral process helps governments to closely monitor the policy changes being proposed or taken by other countries and also sets disciplines for new measures that are potentially restrictive.”

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©OECD Observer No. 272, April 2009

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