China Charts Course for Opening to More Foreign Investment

(Bloomberg) -- China has released plans to relax restrictions on foreign investment and make it easier for overseas companies to list on domestic markets, as Premier Li Keqiang pushes ahead with efforts to open up the world’s second-largest economy.

The government will ease overseas investment curbs on banking, securities, futures, mutual funds and insurance, according to measures approved by Li and published late Tuesday. The steps would allow foreign-invested, locally incorporated firms to issue stock and debt in China.

The document issued by the State Council, China’s cabinet and headed by the premier, ordered ministries to draft detailed rules without giving a deadline. The approval follows a series of announcements about the investment rule changes and previously issued guidelines calling for creating an open and transparent environment for foreign investment.

"It seems to be paving the way for next steps, which seems to be the way many of these policies have been implemented," said Jake Parker, Beijing-based vice president of the U.S.-China Business Council. "In principle the basis of the measures is very positive as it calls for liberalization in a number of areas that have been very important to U.S. industry."

While China is expected to continue opening up to foreigners this year, it’s unclear how meaningful the change will be amid a clampdown on money leaving the country. The new rules were published just as President Xi Jinping urged global business and political elites to reject trade wars and protectionism in his speech at the World Economic Forum in Davos -- and days before President-elect Donald Trump takes office after raising tensions on issues ranging from trade to Taiwan.

The European Union Chamber of Commerce in China said it’s eager to see what the announcement will entail. Open markets require openness in not only trade, but investment as well, the organization said in a statement.

"After so many years of talk of opening up, China is now well positioned to follow through by walking the talk," said Joerg Wuttke, the chamber’s Beijing-based president.

China may be on the verge of "very significant" opening-up to foreign companies, according to a report by Bloomberg BNA. Media briefings suggest significant policy shifts may include fair participation in tenders for government work and a drive to attract companies to the central and western regions, BNA said.

Measures to encourage foreign investment, some previously announced, also include:

• Continue incentives on use of industrial land for prices as low as 70 percent of the national standard
• Eliminate the requirement on registered capital amount for foreign investment firms
• Lift restrictions on foreign firms investing in rail transit equipment, motorcycle production, fuel ethanol and oilseed crushing
• Ease restrictions on foreign investment in oil shale, oil sand, shale gas and mineral resources
• Set up a registration system for oil and natural gas overseas cooperation projects 
• Adopt the same standards for foreign and domestic companies in managing foreign debt and improving corporate foreign-exchange management
• Allow companies to pool foreign and local currencies under central management and promote two-way flow of funds

Foreign-invested firms are not forbidden from going public in China, though they are subjected to high standards in regulatory review. Shanghai-listed NBTM New Materials Group Co. is one of the public companies in China that has foreign shareholders. Japan-based Mutsumi Special Alloy Industry Co. is the biggest shareholder with a 19 percent stake, according to data compiled by Bloomberg.

But companies must get in a long line for a domestic listing. China had 635 initial public offering applications awaiting approval as of Jan. 12.

Foreign investment in manufacturing and production-oriented services will be encouraged, China National Radio reported in December, citing a State Council meeting. The government also will remove restrictions on foreign investment in traffic equipment and oil processing and ease requirements for investment in construction and accounting, the broadcaster said.

(An earlier version of this story corrected the name of the state radio broadcaster.)

To contact Bloomberg News staff for this story: Jeff Kearns in Beijing at jkearns3@bloomberg.net, Gary Gao in Shanghai at cgao58@bloomberg.net, Gregory Turk in Shanghai at gturk2@bloomberg.net. To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Malcolm Scott at mscott23@bloomberg.net, Russell Ward

With assistance from Gary Gao, Jeff Kearns, Gregory Turk