Beijing has pledged to open up more economic sectors to foreign investment, an official statement said, as foreign chambers of commerce complain of a worsening business environment in the country.
China will "unwaveringly insist on the opening-up policy" and "create fair competition environment by treating foreign and domestic funds as the same", the State Council, China's cabinet, said in a statement late yesterday after a meeting hosted by Premier Li Keqiang.
Foreign direct investment in China is estimated to reach 785 billion yuan (now $113 billion) this year, China's Ministry of Commerce said Monday, lower than the total of $135.6 billion last year.
The EU Chamber of Commerce in China has complained of an "unequal investment landscape" in the country and called for it to drop widescale prohibitions on foreign investment.
China will allow foreign firms to operate fully-owned subsidiaries, rather than joint ventures, in sectors including rail transportation equipment and motorcycles, the statement said. It will also let them enter fields including auditing and architectural design for the first time.
Foreign companies will be given the same treatment as Chinese firms in terms of capital required to set up shops, products purchased by the government, and preferential policies for high-tech enterprises, it added.
Beijing has repeatedly pledged to make its economy more responsive to market forces. But China ranked 84th globally –behind Saudi Arabia and Ukraine –in the World Bank's ease of doing business index for 2016, and second to last in an OECD report on restrictiveness towards foreign investment.
The country is trying to stem capital outflows with its yuan currency falling and its vast foreign exchange reserves dropping eight percent from January to November.
China is the world’s second-largest economy and has one of the fastest growth rates of any G20 nation, but its stock markets have been among the worst performing in the world this year.
Starting with a botched attempt to reduce volatility that instead triggered a spectacular meltdown, Chinese bourses have spent the year struggling against feckless policymakers, massive capital flight and a languishing currency.
The benchmark Shanghai Composite Index (SCI) closed on Friday down 12.3 per cent for the year, compared to a rise of 0.4 for Japan’s Nikkei 225, while Hong Kong’s Hang Seng index also rose 0.4 per cent.
China was vying with debt-ridden Portugal for last place among the 40-plus countries tracked by Wall Street Journal’s Market Data Center.
It is a significantly worse performance than 2015’s wild ride, when the SCI surged by 60 per cent in the first half before plunging by more than 40 per cent in under three months. Even so, it finished the year with an overall gain of 9.4 per cent. Then authorities brought in a “circuit breaker” mechanism in January to automatically shut down trading if prices plunged. It went into effect twice in one week, kicking off a self-reinforcing selling panic that spread to global markets, and was scrapped after just four days.
“The Chinese market had a meltdown this year, and so far it has only half recovered from that,” Northeast Securities analyst Shen Zhengyang told AFP, adding the market was still in “slow and gradual restoration”.
The chairman of the China Securities Regulatory Commission was sacked over the debacle. His replacement, Liu Shiyu, has kept a low profile, hurting market confidence and leaving investors seeking direction, said Oliver Rui, a professor at the China Europe International Business School (CEIBS).
“People don’t understand much about the regulator’s policy direction,” he said, adding that the lack of clarity partly explained the market’s weak performance. The falling yuan –lowered seven percent by the central bank over the year in the face of a surging dollar –has also driven investors abroad in search of better performance.