Simplified procedures to lure int'l investors
By Fu Jing (Business Weekly)
Updated: 2004-12-09 14:11

The current robust foreign investment in China is expected to maintain its momentum as the central government streamlines procedures and decentralizes approval rights.

Overseas investors will no longer be required to submit investment feasibility reports if they decide to set up businesses in China. Only applications, which need to contain basic information about the proposed projects, shall be submitted for approval.

At the same time, government departments will be required to respond within 20 days to the applications.

A spokesman from the National Development and Reform Commission (NDRC) said China's ongoing reform of its investment system will create a more favourable environment with simplified procedures.

The current changes deepen the State Council's reform on investment system that started in July. The efforts are aimed to enable businesses, instead of government organizations, to make final decisions on investment and allow the market to allocate resources.

In line with the State Council's efforts, the NDRC, which approves large-scale foreign investment, issued an updated approval procedure for overseas investment in October.

The spokesman said the reform will also give China's provincial governments more say on the approval of foreign investment projects, which are divided into four categories: The projects that are encouraged by the government, permitted but not encouraged, limited or forbidden. For example, those that will cause environmental pollution are forbidden.

Provincial governments will have the right to authenticate projects worth less than US$100 million, up from a former top limit of US$30 million.

In addition, the provincial government can approve projects worth US$50 million which fall into the limited category from the former US$30 million.

Jing Yunchuan, a member of the Canada-China Business Council, told China Business Weekly that the reform will give investors greater freedom to make their own decisions and ultimately make them responsible for their own bottom lines.

Jing, also a lawyer from the Beijing-based Gaotong Law Firm, said the government should play a bigger role in protecting investors' legal rights, while using macroeconomic controls and intermediary organizations to build a sound investment environment.

"Enterprises, banks and the government will play different and more independent roles after this round of investment reform. Banks, not governments, should have a decisive say on money lendings," said Jing.

Jing added that foreign investors used to complain they had to deal with a hundred government departments to get their investment application approved.

However, that is no longer the case. The country has been endeavouring to make its policies and procedures more attractive to overseas investment, especially since its accession to the World Trade Organization.

Domestically, the promulgation of the Administrative Licensing Law streamlines administrative approval procedures.

Foreign investors generally hail the reform, but some complaints still linger.

"I think it is great and encouraging to see that the Chinese Government is taking such a proactive role in helping foreign enterprises and the new policies are all heading in a good direction," said James Jao, president of US-based Jao Design International.

Jao Design has opened branches in several cities, riding the wave of the country's urbanization boom.

But he said more efforts are needed.

Foreigners often get confused with a myriad of regulations in China. It is good to streamline the layers of approval as much as possible.

He also suggested the government should set up a hotline to answer questions quickly.

Despite the complaints, China's foreign direct investment (FDI) in October was up more than 53 per cent year-on-year, bringing 2004's total FDI so far to exceed the number collected throughout 2003, which was US$53.5 billion.

Actual FDI was US$53.8 billion in the first 10 months, an annual rise of 23.47 per cent, according to the Ministry of Commerce.

The World Investment Report 2004, released by the United Nations Conference on Trade and Development (UNCTAD) in September, said China's FDI would hit US$60 billion this year.

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