View

More active role for foreign investors

By Wang Zhile (China Daily)
Updated: 2010-11-12 11:07

In recent years, due to incompletion of some policies in China on foreign investments, foreign investors have complained that they have felt restricted or were driven out of the Chinese market. These complaints, however, are insufficient to draw the conclusion that the environment for investments in China is regressing.

What most critics and media outlets have focused on is how foreign-invested companies should position themselves in China. Some consider these companies with evil intentions.

This year, during meetings with representatives from several multinational companies, Premier Wen Jiabao repeatedly emphasized that any company established and registered according to Chinese laws is a Chinese company and that they should be accorded fair and equal treatment. He said the products they make are "Made in China", while the products they develop are "Created in China".

The Chinese government has designated foreign-invested companies as Chinese-owned companies and this has laid the groundwork for foreign-invested companies to play a more active role in China.

After the financial crisis, foreign investors began putting more money into China. Statistics from the United Nations Conference on Trade and Development showed that in 2009 the nation had attracted $95 billion worth of foreign investments, putting China second in the world in that category after the United States.

This year, the Chinese government released a document titled Several Opinions of the State Council on Further Utilizing Foreign Capital. This is an extremely important document about foreign-invested companies. The document said China should raise "the quality and level of utilizing foreign capital and do better in giving full play to utilize foreign capital in boosting scientific innovation, industrial upgrading and regional coordinated and balanced development".

By implementing this document as a way of improving China's investment landscape, multinational companies will be put on equal footing with their Chinese counterparts.

The document said the policies to upgrade national industries will include qualified foreign-invested companies and China will encourage qualified foreign-invested companies to cooperate with domestic companies and research institutes to apply for national scientific development projects as well as innovation projects.

It is also worth noting in this document that China has focused on the quality of foreign investments, not quantity. The document denigrated "high polluting, high energy consuming and resource dependent" projects coming into the nation. It also shot down projects that were of poor quality or were beyond its means.

With these newly constructed policies, foreign-invested companies should adjust to take advantage of the growing opportunities in China. They should also strengthen their company's social responsibilities.

Here are a few suggestions:

First, the company should put an emphasis on strengthening its efforts to localize, as in blending with the Chinese culture and surroundings. It is helpful for the company to move most of its major business activities to China, especially in research and development (R&D). Its R&D departments should not only target the Chinese market but look out globally and toward the future.

Second, since China is continuously upgrading its industries, foreign-invested companies - to help develop China into a more environmentally friendly economy - should begin selling low-carbon products, making factories environmentally efficient and helping Chinese suppliers promote low-carbon business activities.

Third, the foreign-invested companies should strengthen their cooperation with domestic companies, shifting cooperation from manufacturing to R&D, from hardware production to software designing, from the domestic market to the global market. General Motors and SAIC Motor Corp, China's biggest auto manufacturer, partnered to produce and sell vehicles in India. Partnering with the Aluminum Corporation of China, Alcoa Inc took over Rio Tinto's shares. Those cases have demonstrated the potential for cooperation between multinational companies and Chinese companies.

Fourth, the company should make sure their business practices are in compliance with China's laws and regulations. For many years, several multinational corporations have come to understand and practice corporate social responsibility. Companies should shoulder the responsibility of doing business in accordance with Chinese laws. They should especially not violate anti-commercial bribery regulations.

Thirty years after China opened up and reformed, the Chinese economy has developed sustainably by letting State-owned, private and foreign-invested companies to fairly compete and support each other. While making policies to stimulate economic growth, China should place foreign-invested companies on equal footing as Chinese companies and give them equal access to the market.

China should listen to the criticism from foreign investors and improve the landscape for investments. At the same time, China also hopes that foreign investors can be patient with its investment outlook, which is gradually improving. If all of this happens, China's economy will develop tremendously.

The author is the director of the transnational corporations research center under the Ministry of Commerce.