Investing in China, Part I: Harvest Time

An Attractive Environment

Since its accession into the WTO over a decade ago, China's foreign investment environment has been constantly improving.

Insiders noted that after its WTO entry, China has created a favorable investment environment for foreign businesses by lowering tariffs, reducing transaction costs, improving related laws and regulations and various other means.

The State Council clearly stated in the Several Opinions on Further Improving the Work of Utilizing Foreign Investment issued on April 2010 that China will expand the areas opened to foreign investment, optimize the industry and regional foreign investment structure and enhance the investment and management efficiency to foster a sound investment environment.

"Much support has been given by China's central and provincial governments to support the development of foreign invested enterprises," said Ron Christie, president of Novo Nordisk Greater China.

Moreover, the central document also stressed that foreign companies in China are put on equal footing with their Chinese counterparts and treated equally.

"For a long time, foreign businesses have enjoyed many preferential policies, which have helped them grow rapidly," said Sun Weimin, vice-chairman of Suning Appliance Co Ltd, China's leading retailer of household appliances.

Since joining the WTO over a decade ago, China has opened almost all manufacturing industries and more than 100 service sectors to foreign capital.

"Restrictions on foreign companies have gradually been removed," said Long Yongtu, China's former chief negotiator with the WTO. "China has made substantive progress in opening up the market, making it more transparent and equal."

Intellectual property right (IPR) is fundamental to fair treatment of the knowledge-intensive foreign businesses and services, and the IPR environment in China has been noticeably enhanced.

"As a practitioner in the industry, I did see some effective measures the Chinese governments had taken to provide better IPR services to our businesses in the country," John Duggan, a longtime China watcher and established American attorney, told this journalist.

"The perception is evolving and the money that U.S. companies lose to piracy in China has dwindled."

Dr. Donald Shi, an American expert on software IPR protection, held a similar view.

"From what I've seen, the IPR environment in China has gradually been changing for the better," Dr. Shi said to this journalist. "The IPR-related laws and regulations, the law enforcement measures and the public's awareness of IPR have all been improving."

A report by the European Chamber of Commerce released in Sep 2009 said that China had made progress on improving its investment environment.

Christie believed that China will continue to be a great place to do business, because the country "is expected to have continued economic growth and increasing prosperity, which will ensure it remains one of the largest and most attractive markets in the world."

While FDI around the world tumbled during the financial winter in 2009, it kept flowing into China despite the gloomy global trend.

To put it in a bigger picture, FDI in China expanded from $46.9 billion in 2001 to $114.7 billion in 2010, and quite a few multinational corporations have been pouring large sum of money into the rising economic power.

In 2011, the computer maker Hewlett-Packard and electronics company Foxconn Technology Group declared that they would invest $3 billion in Chongqing, a city in Southwestern China; while Coca-Cola, a global leader in the beverage industry, announced in August 2011 another $4 billion investment in China over the next three years, building upon the $3 billion investment since 2009.

Foreign companies not only keep investing, but are also constantly expanding their projects in China.

In April, Samsung Electronics Co, one of the world's leading electronics companies, announced its $7-billion-investment project in Xi'an, which is the South Korea-based electronics giant's largest investment overseas.

Meanwhile, Ford Motor Co declared that it would increase the annual capacity at its factory in Chongqing from 350,000 to 950,000 vehicles by 2014, together with its joint venture partner Chang'an Automobile Group Co.

"A 10-million-U.S.-dolalr project was extraordinary 10 years ago, but now even projects worth billions of dollars are nothing uncommon," said Ms. Shi, author of the book The Extraordinary Decade.

Preferential policies, widened market access, enhanced IPR protection…all these indicate that China has maintained an attractive investment environment and has been recognized by foreign companies as one of the top investment destinations.