British businesses in China view China’s latest effort to optimise the business environment for foreign investments broadly as a positive development. However, consistent and timely implementation will be key to ensure that they deliver as intended, as CBBC Senior Director Kiran Patel writes in an op-ed originally published by Caixin
On 14 August, China’s State Council released Opinions on Further Optimising the Foreign Investment Environment and Increasing Efforts to Attract Foreign Investment (‘24 Point Guidelines’). The announcement has been both welcomed and met with cautious optimism by British businesses.
The “24 Point Guidelines” appear to address some of the fundamental areas of concern and friction within the business environment amongst our members. Therefore, this announcement has been viewed by the China-Britain Business Council (CBBC) as a positive step towards boosting the perception among British industry in China that this market maintains viable prospects for continued investment, expansion, and growth – and that state-level policymakers are willing to facilitate the necessary changes to attract foreign capital.
While on the surface, China faces well-documented and widely reported economic challenges, the new normal projected GDP growth of between 4% and 5.5% is still exceptional in a global context. Since the reopening of China’s borders for business in March, the lifting of pandemic restrictions and the resumption of international travel, China has been proactive in seeking to resume business as usual and showcase why multinationals and SMEs alike should continue to trust in both the potential and proven track record of the Chinese market – both re-engaging internationally and introducing stimulus measures in the business environment.
In a recent survey with a group of leading British multinationals from across a wide range of industries – including advanced manufacturing, the built environment, financial and professional services, and hospitality sectors – 73% of companies cited that they faced a form of both direct and indirect market access restriction.
Thus, the “24 Point Guidelines” clearly demonstrate that China’s policymakers see intervention as necessary to restore confidence from foreign investors across a number of key areas.
It is encouraging that China will open opportunities for international businesses to establish R&D centres, undertake major scientific research projects, ensure fairness and equal treatment of foreign and domestic companies in government procurement and continue to sustain efforts to enable a secure management mechanism for cross-border data flows – a concern that has factored high on the agenda for our members and the wider international business community alike. We await with interest the introduction of relevant policies and regulations.
Nevertheless, to demonstrate that these guidelines go beyond paying “lip service” to foreign multinationals and to further strengthen trust between industry and the market, we hope that these guidelines are implemented consistently across China’s jurisdictions and that further clarity is given in a timely manner as to how this will be done.
For example, it is positive to see the document make a specific point simplifying relocation to China in terms of entry, exit and residence for foreign executives, technical personnel and their families. The further four-year extension of China’s policy of non-taxable allowances for foreign employees on certain expenses, including children’s education, housing and language training, which will now remain implemented until 31 December 2027, has also been highly welcomed.
The “24 Point Guidelines” clearly demonstrate that China’s policymakers see intervention as necessary to restore confidence from foreign investors across a number of key areas.
With the pandemic significantly reducing the international talent pool throughout China, this will help to curb outflows of qualified international talent and, in time, attract talent from overseas back to China, creating an international professional environment and offering HR departments in multinationals greater control over talent deployment. It also gives reassurance to professionals and families that are committed to their lives and careers in China.
We also view the mutual recognition of professional qualifications, development of market access within the vocational education sector, operational clarity within China’s cyberspace environment, fair access for public procurement and clarity on financial incentives and the recruitment/retention of foreign talent as fundamental points to maintain dialogue on with China’s policymakers and regulators.
It is reassuring for CBBC members to see China continue to build on the achievements made to safeguard the protection of the rights and interests of foreign companies and provide them with stronger fiscal support and tax incentives.
It is encouraging to see China pledging to create and optimise a market-oriented, law-based and first-class international business environment, leverage the advantages of the country’s vast market, and step up proactive and strategic efforts to attract and use foreign investment more effectively. We are eager to see what these points will yield in practice for British businesses, who stand ready to support and thrive commercially in China’s next stage of economic development and transition to innovative high-end manufacturing-based industries.
This article was originally published by Caixin with the title “Opinion: How British Businesses View China’s Latest 24-Point Guidelines to Attract Foreign Investment”