China is ready to deepen its reform and open door strategy to further go global. China is now the world's largest manufacturing exporter, with total export volume reaching 14.4 trillion yuan in 2016. Mechanical and electrical equipments and high-tech products amount for 56 percent and 29 percent respectively. China has set up a strong supply chain for the outside world, and step by step, obtained its Made In China brand name reputation.
Since opening up in 1979, China’s economy has grown rapidly and its commercial law system has developed almost from scratch. In March 2011, the 11th National Peoples’ Congress declared that the construction of a basic socialist legal system was complete. Developing countries in central Asia, Southeast Asia, South America and Africa are in great demand of emulative consumption products such as home appliances, laying the foundation for cooperation. The country's proactive efforts to further open up have paved the way for manufacturers' going global, International and regional trade mechanisms such as WTO and the China-ASEAN Free Trade Zone have expanded Chinese manufacturers' presence, while the Belt and Road initiative and the Asian Infrastructure Investment Bank have opened new markets for capacity cooperation.
China’s presence in the world community
China joined the UN in 1971, since then, China has been striking to promote the world’s prosperity and security. 2017 marks the 72th anniversary of UN's establishment. China, which holds a seat on the UN Security Council, has played a significant role in global affairs since the UN's establishment.
Economic Engine
China plays an important part in stimulating the world’s economy, Nowadays, the world economic situation is more difficult and complicated than ever, featuring a lack of drivers for growth. China’s economic development has not only benefited Chinese people, but also become an important engine for the recovery of the global economy. China has continued to bring positive influence to the world economy. As you can see China is investing in wider areas overseas, including high-speed railway, electricity, and clean energy, since China has the vast construction experience, technology and human resources. The nuclear energy cooperation between China and Britain has set a good example for China’s overseas investment.
China can also attract more foreign investment to improve its standard and capability in related industries.
Belt and Road Initiative
The China’s Belt and Road Initiative refers to the Silk Road Economic Belt and 21st Century Maritime Silk Road, which would use trade and investment to boost ties along the ancient trade routes and elsewhere.
The initiative shows that China has become more active in participating in the world economy, that it will bring real benefits to countries along the route and achieve the goal of joint development. The world is expecting China to play a more important role in improving the status of emerging economies and developing countries in establishing a fair, inclusive and orderly international finance system.
Asian Infrastructure Investment Bank (AIIB)
China has a responsibility to make this world a better and a safer place, and I think it is beginning to do that, whether in Africa [or elsewhere], and now we see with these investments in Asia and the creation of the Asian Infrastructure Investment Bank (AIIB). All these are positive contributions," Annan said.
A developing Integral Legal System
In 1979, publicly available laws and regulations were few and administrative discretion was paramount. Although the legal system has developed significantly over the last 30 years, its development appears to have been ad hoc in many respects. For example, different laws and regulations regulate different types of companies available for foreign investment. Experimental (though binding) regulations are also issued pending the issuance of “final” regulations. From time to time, steps are taken to unify some aspects of China’s foreign
Investment Regime.
The issuance of the Enterprise Income Tax Law in 2007 unified the tax regimes applicable to FIEs and domestic companies (see Section 40 “Corporate taxes & incentives”). The Anti-Monopoly Law, effective August 2008, also brought domestic and foreign investors under the same set of rules (see Section 38 “Competition law: merger control” and Section 48 “Competition law: behavioural provisions”).The court and arbitration systems in China have made significant progress toward becoming independent and impartial. Since 2002, judges and prosecutors have been required to pass the state bar exam.
Environment Protection
The first couple of decades of China’s development saw economic development take priority over
environmental concerns. The result has been polluted air, water and soil on an unprecedented scale.In recent years, however, China has sought to encourage environmentally-friendly investment and to actively discourage pollution-heavy industries. The Ministry of Environmental Protection was formed in March 2008, and enforcement of environmental regulations and standards continues to improve. With China taking a more visible role in international environmental forums and with its citizens becoming more concerned about environmental issues, China’s attention to the environment is set to continue.
Inbound Investment
Even as political and economic reforms have opened up further opportunities to foreign investors in China, subtle shifts have taken place in the environment for companies seeking to invest in the People’s Republic of China (PRC). While the desire for foreign technologies and know-how remains strong, Chinese companies, government officials and consumers alike have become increasingly sophisticated and selective with regard to how, and with whom, they do business. For example, localization through training and overseas higher education is creating in a strong, multi-lingual force of managers in Chinese companies. This has clear advantages for those companies as they explore investments overseas. It makes it easier for investors from outside China to interact with them; but it also means greater competition among foreign enterprises, experts and job-seekers in the PRC market.
Outbound Investment
The rapid growth of outbound investment has been one of the key features of the Chinese economy over the last few years. Although not directly the concern of this publication, the outbound investment trend demonstrates the desire of many Chinese companies to become globally competitive. In turn, this is likely to make successful Chinese companies even more competitive in China, their home market.
The central government in China has placed a significant emphasis on outbound investments as a sustained policy. In large part, this is due to the country’s need to secure a reliable and long-term supply of natural resources. To a lesser extent, it is due to swelling foreign exchange reserves and upward pressure on the Renminbi. Meanwhile, businesses, and even governments across the globe, are actively seeking Chinese investors to help bolster their economies, many of which are still recovering from the global financial crisis.
Notwithstanding the explicit “Going Abroad” policy of the Chinese government, and the efforts that have been made to increase access to foreign exchange and streamline domestic approvals, the outbound investment process itself remains complex, unpredictable and time-consuming. This is true of both the internal and external procedures required of Chinese investors. As a result, investments involving Chinese entities are often delayed, or fail altogether. Just as Chinese investors must anticipate this difficult approval process when undertaking projects abroad, their foreign partners are advised to study and understand it thoroughly.
WTO
China joined the WTO on 11 December 2001. Since then, China has become a more integrated member of the world’s trading system. While anti-dumping and anti-subsidy actions have been increasing, the resolution of these disputes is now subject to WTO processes. Foreign investors have also benefitted from the opening of many sectors to foreign investment and China’s commitment to reform its legal system relating to trade in goods and services, intellectual property and foreign exchange control.
CEPA
The Closer Economic Partnership Arrangements with Hong Kong and Macau give Hong Kong and Macau businesses greater access to China’s markets. Goods of Hong Kong or Macau origin can benefit from reduced tariffs in China. Hong Kong and Macau businesses have also been given greater access to various service sectors.While the main text of CEPA was signed in 2003, annual supplements from 2004 to 2011 have progressively opened up investment opportunities for Hong Kong and Macau investors.
Prospects
China has made great progress in establishing a legal system, particularly in relation to foreign investment, corporate and commercial matters. However, implementation of the law can be uneven and in many areas there remains a need for implementing rules that give guidance as to the practical details. Foreign investment opportunities are likely to exist for a long time to come. However, the foreign investment restrictions outlined in this guide are also likely to continue.
Relationships It is often said that relationships (in Chinese, “guanxi”) are particularly important in China’s business context. However, relationships are never a substitute for a solid legal structure and operations that are compliant with；
Chinese manufacturers are poised to expand their global presence thanks to a string of policies supporting the export of high-value industrial capacity. "Capacity cooperation means more than export of finished products, but also the transfer of the whole industrial chain to help other countries beef up their manufacturing capability," Gu Dawei, head of the foreign investment administration department of the National Development and Reform Commission, said at a press conference on Wednesday.
International industrial cooperation has been a key priority on the Chinese government's reform agenda after slower economic growth last year. Chinese Premier Li Keqiang, a proactive supporter of industrial capacity cooperation, signed trade agreements worth $27 billion during his visit to Brazil on Tuesday.
More international industrial capacity cooperation projects are expected to roll out as China's cabinet specified a list of sectors in need of more cooperation recently, encouraging manufacturers of automobiles, rail, machinery and others to go global.
Get Well Prepared and Open-Minded for Better Investment
To stand apart from the crowd and conclude transactions successfully, it is important for any investor venturing into a foreign country – including to or from China – to be well prepared. This sounds obvious and easy, but in practice demands focus and dedicated resources.
Identify clear goals, and prioritize them;Select and identify the right opportunity: know your partner’s background; Make sure your company qualifies for the big and/or meets local regulations;Think carefully about the market consequences both at home and abroad; Understand labor laws and employment regulations: do not assume that what applies in one’s home country will apply in the target jurisdiction; Become familiar with the local business environment; community, customs and practices; Be flexible and innovative – this will help you deal with issues you could not anticipate; Surround the project with good advisors.
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