China has decided to target foreign investors in the telecommunications, education and health services sectors with a sharp decline in foreign direct investment (FDI).
An executive session of the State Council chaired by Chinese Prime Minister Li Keqiang was held on Monday, and four documents were reviewed and approved to help attract foreign investment.
The documents include a 2024 version that includes special administrative measures or a negative list for access to foreign investment. According to the negative list, China will completely remove barriers to entry in the manufacturing sector and accelerate the opening of sectors such as telecommunications, education and health services.
“The recent executive session of the State Council decided to promote the country’s service industry by promoting the necessary cross-border resources such as talent, capital, technology and information,” said Zheng Wei, Shanghai-based China Outsourcing Institute. Researcher, a research. The unit, which operates under the Ministry of Commerce, said in an interview with Economic Information Daily.
Zheng said: Opening up the telecommunications, education and health care sectors, which are relatively sensitive industries, shows China’s determination to actively open its economy to the world. “In the future, China will take more important measures to speed up its opening and increase the confidence of foreign investors in the country.”
When China began opening up its economy in the 1980s, it initially eased restrictions on foreign companies investing in its manufacturing sector.
In the automotive sector, foreign companies are required to form 50-50 joint ventures with Chinese partners to conduct business in China. But this kind of restriction has expired since 2022.
For national security reasons, China has never opened up the telecommunications, education and health services sectors, which are still controlled by state-owned enterprises (SOEs). Beijing is expected to gradually ease regulations in these industries.
According to many observers, China has no plans to open up its defense, energy and media industries in the short or medium term.
FDI and jobs
The latest decisions of the State Council came after China’s foreign investment in the first half of this year decreased by 29.1 percent compared to a year ago to 498.9 billion yuan (69.5 billion US dollars). has arrived
At the same time, China’s outward direct investment (ODI) rose 16.6% to US$72.62 billion, as more Chinese manufacturers had to outsource production to cut costs or avoid new tariffs from the West. Increase capacity.
China needs to increase its foreign investment because the labor market has so far failed to create enough jobs for young people.
According to data from the National Bureau of Statistics (NBS), China’s youth unemployment rate rose to 17.1 percent in July, the highest level since the new record-keeping system began last December. is In June this year, this figure was only 13.2%.
In June 2023, the youth unemployment rate reached a record high of 21.3%, the NBS said.
For the second half of 2023, China has delayed reporting its youth unemployment rate. It said it was reevaluating its accounting methods. In February this year, the NBS said that the youth employment rate, calculated with the new method, was 14.9% for last December.
That number hovered around 14% in the first half of this year until a significant increase in July. Chinese officials said that this increase was due to the increase in the number of fresh graduates in the summer.
Appreciating Deng again?
The 20th Central Committee of the Communist Party of China concluded its third general meeting on July 18 by approving a five-year plan aimed at the development of China’s industries and economic reforms.
On July 30, Xi Jinping, General Secretary of the Communist Party of China, said that China’s economy is facing many adverse effects of changes in the external environment, while the effective domestic demand is not enough.
On the same day, Xi Jinping asked Hong Kong businessmen in a letter to promote investment in China and participate in the reform and opening process of this country. However, reactions from Hong Kong tycoons have remained lukewarm so far.
On August 16th, the official theoretical magazine of the Communist Party of China, Kiyoshi, published two articles praising former Chinese leader Deng Xiaoping’s contributions to the reform and opening up of China’s economy in the 1980s.
Both theories also said that Deng strengthened China’s relations with America, Soviet Union, Japan and Britain.
Mengjing News, a Chinese news website based in Canada, said in a commentary that Kyoshi’s two articles were aimed at using Deng’s popularity to unite with the CCP, which he now leads. It said the two articles were not politically incorrect because they only reminded party members to support Xi’s economic reforms.
capital outflow
Beijing is not only trying to attract foreign investors to boost its FDI but also taking precautions to prevent panic in the Shanghai and Shenzhen stock markets. Starting Monday, China stopped publishing daily data on foreign fund flows.
In April, Chinese officials had already signaled a reduction in real-time data on northbound foreign fund flows from Hong Kong to China’s stock markets. They made this decision at the end of July.
Some analysts said Beijing hoped to reduce market volatility spurred by high-frequency data and shift investors’ focus to longer-term indicators, such as the People’s Bank of China’s quarterly report on financial assets held by foreign institutions. Reports.
They said the move would not address the root of the problem caused by global investors’ poor confidence in China’s economy, while it would reduce the transparency of cross-border investment.
Chen Hongbing, head of Anhui Meitong Asset Management Ltd, told Taiwan’s UDN.com that the daily data on the North Side funds of funds is considered by investors as an indicator of overall market sentiment. He said the decision to stop publishing information may help prevent speculative activities and reduce market volatility.
However, some individual investors said it is unfair that they cannot now get real-time data while brokerage firms can still monitor and predict market trends using their data.
Read: The property crisis still hurts China’s investment and consumption
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