Xi Jinping Announces Full Removal of Restrictions on Foreign Investment in Manufacturing Sector

On the opening ceremony of the 3rd Belt and Road Summit being held in Beijing today, Chinese President Xi Jinping stated that China will lift all restrictions on foreign investment access in the manufacturing sector.

According to China’s latest document on the management of foreign investment access, there are now only two restrictions remaining: maintaining Chinese control over publications, and prohibiting foreign investment in certain processing techniques for traditional Chinese medicine and production of proprietary Chinese medicines with confidential prescriptions.

Bai Ming, a researcher at the Research Institute of the Ministry of Commerce, commented that the lifting of restrictions on foreign investment access in the manufacturing sector gives out a strong signal that China’s opening-up will continue to expand and improve. He pointed out that encouraging foreign investment in manufacturing is also beneficial for strengthening China’s position in the global industrial supply chain as a “manufacture superpower”.

The “2023 Statistical Bulletin on Foreign Investment in China” shows that in 2022, China’s absorption of foreign investment continued to grow steadily. The actual utilization of foreign investment reached $189.13 billion for the whole year, an increase of 4.5%. In terms of RMB, it exceeded 1.2 trillion yuan for the first time, with high-tech industries becoming important growth drivers. Investments from the European Union and ASEAN into China increased by 95.3% and 9.5% respectively. Additionally, according to data released by China’s Ministry of Commerce, in the first six months of 2023, there were 24 thousand newly established foreign-invested enterprises in China, representing a growth rate of 35.7%.

On September 27th, Sheng Qiuping, Vice Minister of the Ministry of Commerce stated at a press conference that currently, the so-called “negative list” for foreign investment access in pilot free trade zones has achieved “zero restrictions” in the manufacturing sector. The next step will focus on promoting openness in the service industry.

Gao Ruidong, Chief Economist of Everbright Securities, recently stated at the China Macro Forum (CMF) that in response to the US’s “risk-off” economic strategy, China should take three actions. Firstly, it should further reform and open up to become a defender of globalization. Secondly, it should focus on building a more resilient supply chain system. Thirdly, it should strive to expand total demand.

“Foreign investors prioritize China’s market, and then consider its business environment and cost advantages. If the overall demand is insufficient and prices are relatively low, China’s attractiveness to foreign investors will systematically decline. By focusing on expanding total demand and ensuring economic growth remains at a certain level consistent with potential output, it will be beneficial for promoting continuous capital inflows from foreign investors as well as technology spillover effects,” said Gao Ruidong.

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