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Support Urged for Firms Going Global

Assistant Minister of Finance Wang Jun Tuesday urged more support for the initial stages of overseas investment by Chinese companies.

Wang made the remarks at an international forum on Chinese companies' global investment strategies, sponsored by the Ministry of Commerce.

He said it was important for China to learn from the initial "going global" strategies of firms in developed countries.

Wang said major developed countries have provided a wide range of supportive financial and taxation policies with regard to overseas investment, making these policies a systematic and standard measure.

The establishment of overseas investment funds is a common practice in the financial sector, while, with regard to taxation, these governments often reimburse a high rate of tax to machinery equipment, raw materials and semi-finished products that have been exported for overseas investment, Wang added.

These policies have greatly encouraged enterprises in developed countries to invest overseas and propelled the development of their multinational corporations, he said.

"We should study and construct supportive policies for the promotion of overseas investment soon within the framework of the WTO (World Trade Organization) rules," Wang said.

Shao Ning, vice-chairman of State-owned Assets Supervision and Administration Commission, said Chinese companies' expansion overseas becomes a strategic issue when developing China's economy in the medium and long term.

Large Chinese enterprises will provide China's economy with broad space for development if they survive international competition and grow even stronger, Shao said.

"In the opposite scenario, the national economy is very likely to slow down due to market constraints," he said.

Shao said the commission will reduce the number of administrative approvals and give large State-owned enterprises decision-making powers on investments to help them enter the international market.

The commission was set up early last year to supervise State-owned enterprises, which are mostly large and continue to play an important role in the national economy.

Wang Zhile, director of the research center on transnational corporations, said Chinese companies face more difficulties in growing into multinationals compared with transnational companies based in other countries.

Some companies have not completed the construction of a modern enterprise system during the transitional period from a planned to a market economy.

But they have to deal with global competition while reforming their management structure, Wang said.

Emerging Chinese multinationals will experience strong resistance from the current multinationals who have dominated their respective industries for a long time, he said.

But Wang said foreign countries and companies should harbor a friendly attitude to Chinese investment which actually aims to create a win-win solution.

Zhou Yucheng, chairman of the China Huayuan Group Co Ltd, one of China's largest textile and pharmaceutical groups, said its invested factories in foreign countries have been local stars because of the benefits they offer.

For example, its textile company in Mexico has an annual local purchase of US$15 million, which provides 5,000 job opportunities indirectly.

The group has a total overseas investment of US$300 million in United States, Mexico, Canada, Niger and Thailand and have 3,500 foreign employees.

China's rise as a global investor has been noted by many foreign countries, which hope to be destinations for this cash.

Many investment promotion organizations are present at the forum, including the Korea Trade-Investment Promotion Agency, the Japan External Trade Organization, the Singapore Economic Development Board and United Kingdom Trade and Investment.

China's outward investment reached US$2.1 billion last year, a small figure compared to its potential, but a year-on-year rise of 112 percent.

The world has come to realize that Chinese enterprises are at the threshold of becoming major foreign direct investors in Asia and beyond because of their financial strength and exposure to international business.

(China Daily May 26, 2004)

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