The State Administration of Foreign Exchange (SAFE) Monday
announced measures which will boost the flow of foreign direct
investment (FDI) into China.
SAFE issued a circular, upgrading rules related to FDI. The rules
will come into effect on April 1.
They contain a broader array of funding sources that foreign
investors can use as their stakes in Sino-foreign joint ventures,
and clarify procedural matters regarding FDI-related forex
administration.
The purpose of the rules is to "adapt to the new trends in
international investment, attract foreign capital by a
multi-channel approach, continue to optimize foreign direct
investment-related foreign exchange management and further improve
the environment for foreign investment," said a SAFE spokesman.
Foreign investors that have not yet established enterprises in
China can now open four types of special forex accounts -
investment, procurement, expenditure and guarantee - to meet their
operational needs, the circular said.
They can, with SAFE approval, use deposits in non-resident non-cash
personal accounts opened in China as their stakes in Sino-foreign
joint ventures (JVs), or use funds in offshore accounts opened at
designated Chinese banks for the same purpose, without permission
from SAFE.
The circular also authorizes an additional list of sources,
including foreign-invested enterprises' reserves, undistributed
profits, and proceeds from transferring shares in foreign-invested
enterprises, for foreign investors to set up Sino-foreign JVs.
Previously, they could use forex cash, intangible assets and
renminbi-denominated profits.
Analysts said the circular aims to further boost FDI inflow, which
already played an important role in ensuring China's robust 7.8
percent gross domestic product growth rate last year.
China overtook the United States for the first time last year as
the world's biggest FDI recipient, attracting US$52 billion.
And the outlook is rosy. Long Yongtu, secretary-general of the
Bo'ao Forum for Asia, told reporters on the sidelines of a forum on
Saturday that he was "confident" with China's foreign direct
investment in the years to come.
"But we cannot be blindly optimistic," said Long, also a former
vice-foreign trade minister. "Whether the funds come or not depends
on whether the returns are high or not."
The newly approved Ministry of Commerce, unveiled on Friday on the
basis of the former foreign trade ministry, would take measures to
ensure consistency and stability in China's foreign direct
investment policies, he said.
(China Daily March 25, 2003)