China’s Investment Guidelines 2023: Old wine in new bottles?

published on 13 September 2023 | reading time approx. 4 minutes

On 13 August 2023, the State Council of China issued new guidelines on further promoting and improving the foreign investment environment. These guidelines are titled "Opinions on Further Optimizing Foreign Investment Environment and Reinforcing the Efforts to Attract Foreign Investment". The guidelines aim to intensify efforts to attract foreign investors. The guidelines cover six areas with a total of 24 concrete measures.

In the following, you will find an overview of the six areas and a selection of the specific measures provided therein:

1. Encouraging investments in specific industries

In these guidelines, this area is referred to as "Improving the Quality of Foreign Capital Utilization." That means that foreign investment in certain sectors desired by the government shall be particularly promoted in order to achieve steering effects.

Examples include:

Establishment of research and development centers in China to carry out scientific projects and develop industrial applications. Special attention is given to projects in the field of biomedicine, with the aim of accelerating them. This includes conducting clinical trials of foreign-made pharmaceuticals and transferring the production of such pharmaceuticals to China.
Providing support and encouragement to foreign-invested enterprises in the fields of advanced manufacturing, modern services, and the digital economy. In this context, vocational trainings shall be carried out in cooperation with Chinese vocational schools, universities and vocational training institutions under the instruction and participation of the enterprises.
Expansion of pilot projects for foreign investors' participation in Chinese enterprises, including equity and venture capital investments. Likewise, opportunities will be created for the establishment and operation of value-added telecommunications services.
Expanding investment options for foreign investors through holding companies and regional headquarters, as well as through foreign qualified limited partnerships.
Supporting foreign companies in relocating (parts of) their production from the eastern parts of the country to the central, western, northeastern and border regions. This would be facilitated through partnerships and cooperation with local companies.
Increasing the efforts of local authorities in handling and realizing foreign investments, as well as providing more efficient support to investors.

2. Ensuring equal treatment

The measures are intended to ensure that foreign-invested enterprises can fully participate in government procurement and tendering and receive the same treatment as domestic enterprises (national treatment). This also includes new regulations regarding the origin of products manufactured in China (Manufactured Within the Territory of the PRC) and specific standards to provide greater clarity.

3. Strengthening the protection of foreign investment

In this area, measures are envisaged, in particular, to tackle malicious speculations through the publication and dissemination of false information on the Internet, which affect the rights of foreign investors. Increased action will also be taken against those responsible for such acts. In addition, the protection of intellectual property is to be improved, in particular by stepping up enforcement of intellectual property rights at the administrative level.

4. Facilitation of investments and operational processes

In this area, primarily administrative regulations and procedures are being optimized. This includes aspects such as entry requirements, work permits and residence permits for foreign professionals, cross-border data transfer, including personal data, as well as the inspection rates of foreign-invested companies, especially those with high credit ratings.

5. Financial and fiscal support

The measures envisage greater support for foreign investment by granting financial and tax incentives. These include, for example, the provision of special funds in state funds and tax breaks for the re-investment of profits in the inland, tax reliefs for foreign employees, the subsidization of qualified research and development projects and other support measures.

6. Improvement of economic promotion

This aspect concerns, in particular, the local authorities responsible for economic promotion and attracting foreign investment.

7. Our analysis of the new guidelines

Overall, these guidelines send a positive and optimistic signal from the Chinese government. They aim to further promote existing foreign investment, attract new foreign investors and increase foreign investor confidence.

However, a closer analysis shows that many of the proposed measures contain hardly anything new. Many of these measures are already anchored in existing laws and regulations, such as the equal treatment of foreign-invested companies in public tenders in the Foreign Investment Law. Incentives for certain investments are already included in the relevant investment list for encouraged industries (Catalogue of Encouraged Industries for Foreign Investment (2022)). Tax incentives for investment in central and western regions also already exist as part of the "Go West" strategy.

Other measures outlined will initially require modifications to existing regulations, such as in public procurement law with regard to public tenders. It therefore remains to be seen how foreign-invested companies can benefit from these measures.