China relaxes rules on approval procedures for foreign investment

It was extremely challenging to enter the business market of China. China’s economy has continued to grow almost double the rate from the last ten years. China’s rapidly changing economies, improving incomes, and an increasingly open business environment have all helped make the Chinese market increasingly attractive to Western businesses across various industries.

The approval procedures for various foreign-invested projects have been removed lately by China. This will certainly help in attracting new investors and help foreign companies operating in the country. Experts revealed that this change would make a positive impact on foreign direct investments in China. According to the National Commission for Development and Reform Commission (NDRC), the latest guidelines indicate that projects up to $30 million will not undergo registration procedures for approval.

Ministerial-level authorities to provincial-level ones will handle projects ranging from $30 million to $300 million. These projects will be in industries covered by China’s Catalogue of Industries for uplifting the Foreign Investment. Announced on March 22, these guidelines focus on facilitating and streamlining investment projects. Researchers also suspect that the step will further increase China’s ability to draw foreign investment as procedures are eased, and the role of lower-level governments is increased.

Apart from this, the move is designed not only to cut red tape for foreign companies but also to motivate provincial governments to work more closely with the NDRC. Extending their mandate will help form a positive link between local governments and foreign companies as Provincial governments are more likely to know more about the specifics of these investment projects than the central NDRC.

One of the senior researchers at the Academic Center for Chinese Economic Practice and Thinking at Tsinghua University also said the move would encourage provincial-level governments to work more closely with the NDRC. She further added that based on the research’s data, the foreign-invested under $30 million and qualified under the catalog of industries are small and medium-sized ones in the scientific and technological research, software, and manufacturing industries.

All the below $30 million projects are relatively small, and those between $30 million and $300 million are more likely to be medium-sized ones. Giving more power of approval to provincial-level governments will incentivize them to develop potential foreign projects.

Therefore, the guideline clarifies that for projects between $30 million and $300 million, the potential investor will be allowed to file the application with provincial-level authorities directly.

“Provincial-level governments, more often than not, know more specifics of these investment projects than the NDRC,” she said. “Giving them such a mandate will help formulate a positive link between local governments and foreign businesses.

All these changes contribute to the country’s more comprehensive effort to make the market play an essential role in assigning resources by reducing costs for foreign companies and creating a level playing field for competition between domestic and foreign companies.

The Chinese Bureau of Statistics figures show that from January to February, the value of investments in fixed assets was 4.52 trillion RMB (688 billion USD), which depicts a year-on-year boost of 25 percent and also an increase of 3.5 percent compared to 2019. Foreign companies also welcome these changes, which save time and money by speeding up approval processes.

All this sums up that the Chinese government’s current efforts to draw foreign investors are very successful, according to available figures. Therefore, in case you are considering investing in China, your right time is now. Plan the business model, work on your business structure and avail the benefits of this new ease of rules on approval procedures for foreign investment. 

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