China trials new FDI rules

A senior official from the Ministry of Commerce in China has revealed that foreign direct investment (FDI) rules are to be relaxed in pilot areas to encourage more overseas interest.

The capital Beijing, the country’s financial centre Shanghai and the provinces of Jiangsu and Guangdong are to be included as pilot areas under the new regime, which will streamline paperwork and auditing processes for foreign companies. Deputy Bureau Chief of the Foreign Trade Department Huang Feng said the ministry will use the designated areas to see whether similar incentives could be rolled out country-wide in the future.

FDI in China slowed over 2012, although the first quarter of this year has seen an upturn in activity as international investors look to advance on improved economic indicators in the country. Some US$38.3bn in FDI was invested in China in the first four months of this year, up 1.21% from the same period last year.

But economists still fear that increasing labour costs, high energy prices, weak intellectual property rights and a regulatory environment that restricts many foreign firms is discouraging international funds from flowing into the country. According to the official China Securities Journal, the decline of profitability of foreign companies in China is due to a changing economic environment and increased competitiveness of domestic firms.

TMF Group has offices in China where our dedicated staff can help overseas firms expand. Aside from the financial investment risks, understanding the varying compliance, business licenses and reporting requirements across the 33 Chinese provinces and administrative departments represents a huge drain on any management team’s time. Having local help can therefore be crucial to the success of the venture.

 
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