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Making Foreign Investment Easier

China recently further simplified its foreign investment procedures.

Few documents will be required when applying to invest in this country. And investment caps will be raised for foreign-invested projects requiring local government approval.

Provincial governments will be able to give the nod to "encouraged" or "permitted" projects of less than US$100 million, up from a previous limit of US$30 million.

Caps for projects in the "limited" category that provincial governments can approve will be raised from US$30 million to US$50 million.

China divides foreign investment projects into four categories: encouraged; permitted but not encouraged; limited and forbidden.

Foreign investors used to complain they had to deal with a hundred government departments to get their investment application approved.

However, that was long ago. The country has been endeavouring to make its policies and procedures more welcoming to overseas investment, especially since its accession to the World Trade Organization.

Domestically, the promulgation of its Administrative Licensing Law streamlines administrative approval procedures.

In July, the State Council decided to further reform its investment regime, requiring a reduction in the number of investment items subject to examination and approval.

The current procedural reform for foreign investment is in line with the modification of the country's overall investment regime.

As a market economy, China has turned increasingly to the market to allocate resources. But from the perspective of the rational use of resources, sound regulation is necessary for environmental protection, protecting public interests and the prevention of market monopolies.

The country seeks to strike a balance between considering those factors and attracting foreign investment.

For example, approval of investment less than US$50 million in the "limited" category shall not be relegated to authorities below the level of province.

Meanwhile, as a sign of more relaxed policies, the formerly indispensable project feasibility report is no longer required. Only applications, which need to contain basic information about the proposed project, shall be submitted for approval.

(China Daily December 1, 2004)

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