Beijing and Shanghai municipal governments have introduced a series of measures to facilitate the flow of foreign capital in and out of China and enhance foreign investment climate. These measures not only underscore China’s commitment to institutional opening-up but also create a more welcoming atmosphere for foreign investors looking to engage in the Chinese market.
Shanghai leads the way to promote foreign investment
The Shanghai government, in a bid to promote foreign investment, unveiled 31 new measures on September 1, allowing all investment-related inward and outward remittances by foreign investors within the China (Shanghai) Pilot Free Trade Zone to flow freely, provided they adhere to established regulations. This groundbreaking policy aims to protect the legitimate rights and interests of foreign investors within the zone.
Lou Feipeng, a researcher at Postal Savings Bank of China, views these measures as a significant step forward in China’s ongoing institutional opening-up. He believes that these moves will not only protect foreign investors but also contribute to an improved business environment, which is essential for China’s high-quality economic growth, expected to be fueled by increased foreign capital inflows.
Beijing joins in
Simultaneously, the Beijing municipal commerce bureau released a draft version of foreign investment regulations, affirming its support for the free inward and outward remittances of foreign investors’ actual and authorized capital transfers related to investments. These remittances are expected to be processed without delay, pending public comments until October 19.
Cui Fan, a professor of economics at the University of International Business and Economics in Beijing, asserts that these measures align with the 33 measures unveiled by the State Council in June. The goal is to facilitate cross-border capital flows, promoting institutional opening-up within the designated free-trade zones and the free port.
A wide spectrum of capital remittances
Under these new measures, businesses are permitted to freely and promptly transfer various types of legitimate and authorized transfers related to foreign investment. These encompass capital contributions, profits, dividends, interest payments, capital gains, proceeds from the sale of investments, and contractual payments, among others, as outlined by the State Council.
Implementation and expansion
Initially, these measures will be rolled out in the Free Trade Zones (FTZs) of Shanghai, Beijing, Tianjin, the provinces of Guangdong and Fujian, and Hainan Free Trade Port. Moreover, the Beijing municipal commerce bureau has announced plans to extend these measures beyond the FTZ, demonstrating a resolute commitment to expand high-level opening-up.
These changes are expected to play a pivotal role in the internationalization of the renminbi, further strengthening China’s position in the global financial landscape.
Wang Xin, director of the research bureau at the People’s Bank of China, anticipates that companies and individuals in these six locations will undergo initial trials, leading to enriched investment channels thanks to the State Council’s progressive policy. This top-down approach ensures a structured, cohesive approach to institutional opening-up, benefiting China’s development and aligning with its dual-circulation paradigm.
Enhancing foreign investment
The Beijing and Shanghai municipal governments’ measures to facilitate foreign capital movement signify China’s commitment to improving the business environment and attracting more foreign investment. These actions align with China’s goal of institutional opening-up and are expected to foster a more conducive atmosphere for international investors looking to engage with the Chinese market.