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New Policy Stresses Quality of Foreign Investment
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China on Thursday published its 11th Five-year Plan (2006-2010) for utilizing foreign investment and it states the policy priority will be given to the quality rather than quantity of such investments.


The National Development and Reform Commission (NDRC) published the document on its website. This is the first time such a document has been published.


"This is an important measure taken by China in creating a stable and transparent foreign investment management system as well as a fair and predictable policy environment," the NDRC said.


According to the document, China utilized US$383 billion of overseas investment during the 10th Five-year Plan period (2001-2005), including US$286 billion in overseas direct investment, US$38 billion in stock issuances and US$46 billion in foreign loans.


It criticizes some local governments for their blind efforts to secure foreign investments, some of which are apparently against the central government's industrial policy.


The document notes that emerging monopolies by foreign businesses in certain industries are posing a potential threat to China's economic security.


It also criticizes foreign businesses for abusing intellectual property rights protection laws. This  has adversely affected Chinese enterprises' capacity for independent innovations, it observes.  


The document says China will push for further shifting of policy priority from the quantity to the quality of foreign investment during the next five years.


Priority will be given to the introduction of advanced technologies, management expertise and high-quality talents rather than the use of foreign capital, the document says.


More emphasis shall also be given to the protection of the environment and efficient use of natural resources, it states.  


The document stresses the need for more foreign investment in areas such as research and development as well as sophisticated design so China could eventually become a major manufacturer of high value-added products.


It also calls for more foreign investment in China's remote west and the northeast rust belt. They currently lag far behind the coastal regions in the amount of foreign investment.


Despite the emphasis on quality the document says China expects its foreign investment to keep rising in the next few years.


"During the 11th Five-year Plan period the domestic and international environment affecting foreign investment in China will generally tend to improve, making it possible for China to improve the quality of foreign investment while maintaining quantity," the document says.


According to the document China will continue to encourage foreign investment in agriculture, electronics and information, petrochemicals, chemicals, automobiles and infrastructure.


Foreign businesses will be encouraged to take part in the restructuring of traditional industries such as machinery, light industry, textile, raw materials and construction.


Foreign investment in environment protection, including the control of water and air pollution and recycling will be welcomed, the document states.


In the service sector the document says China will fulfill its duties under the World Trade Organization and open its banking, insurance, securities and telecommunications sectors to foreign investment in a positive and prudent manner.


In response to the rising concern over foreign acquisitions of leading Chinese firms in critical sectors, the document says China will speed up legislation and step up the supervision of sensitive acquisitions and takeovers to ensure critical industries and enterprises remain under Chinese control.


(Xinhua News Agency November 10, 2006)


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