Advancing high-level opening-up for high-quality foreign investment

Editor's note: Lu Yue, a special commentator on current affairs for CGTN, is a professor at the Academy of China Open Economy Studies, University of International Business and Economics (UIBE), and executive director of the Academy of Global Innovation & Governance, UIBE. The article reflects the author's opinions and not necessarily the views of CGTN.

High-standard opening-up is an intrinsic requirement for advancing Chinese modernization and a powerful impetus for promoting high-quality development, with reforms in outward investment management systems playing a crucial role.

On September 26, 2024, the Political Bureau of the Communist Party of China Central Committee held a meeting to analyze and study the current economic situation and make further arrangements for economic work. The meeting pointed out the need to intensify efforts to attract and stabilize investment, promptly advance reforms regarding foreign investment access in the manufacturing sector and further optimize a first-rate business environment that is market-oriented, law-based and internationalized. These initiatives provide important guidance for pursuing high-standard opening-up.

Firstly, the comprehensive removal of restrictions on foreign investment access in the manufacturing sector is beneficial for guiding foreign capital towards advanced manufacturing and high-tech industries. This not only optimizes the structure of foreign investment but also enhances its scale and quality, accelerating the development of new productive forces.

Additionally, it promotes healthy competition and deeper collaboration between domestic and foreign enterprises, creating opportunities for cutting-edge technological innovation and complementary industrial strengths. Ultimately this contributes to the construction of a highly competitive industrial chain on the international stage.

Furthermore, the legal protection of foreign investment rights and interests, facilitated by clear rules and stable expectations, helps attract more high-quality projects and enables foreign and domestic enterprises to invest and develop confidently in the market. This, in turn, further promotes economic diversification and enhances innovation capabilities.

It also contributes to maintaining a fair and orderly market competition environment, ensuring the just implementation of policies and laws, encouraging more foreign enterprises to actively participate in market activities and fostering a higher level of openness and cooperation.

Finally, actively aligning with high-standard international economic and trade regulations and achieving compatibility in rules, regulations, management and standards can reduce compliance costs for foreign enterprises. By providing standardized regulations and transparent market mechanisms, this approach helps foreign companies better understand market rules, thus enhancing the efficiency of their investment decision-making and boosting their confidence in investing in China.

In addition, it facilitates the establishment of broader cooperative relationships and accelerates the implementation of high-level investment agreements, thereby improving the international investment environment and achieving efficient resource allocation and mutual benefits in economic exchanges.

In recent years, China has continually advanced its high-standard of opening-up, including improving its legal and policy framework for foreign investment, promoting the management model based on pre-establishment national treatments plus a negative list, refining policies to facilitate foreign investment in industries, among others.

As a result of these ongoing initiatives, China's foreign investment structure has been consistently optimized. Against the backdrop of declining global cross-border investment flows, China absorbed over $163 billion in foreign direct investment in 2023, accounting for 12.3 percent of the global total, thereby maintaining its position as the second-largest recipient of foreign investment worldwide.

In terms of sectors, high-tech industries attracted approximately $61 billion, representing 37.3 percent of actual utilized foreign capital, an increase of 1.2 percentage points from 2022, reaching a historical high. Regarding the origin of investment, actual investments from France, the UK, the Netherlands, Switzerland, and Australia grew year-on-year by 84.1 percent, 81 percent, 31.5 percent, 21.4 percent, and 17.1 percent, respectively.

These new developments are closely related to China's comprehensive advantages, which involve its enormous market, complete industrial support, high-quality talent and so on. First, China's enormous domestic market, along with the accelerated upgrading of consumer structures, has fostered various new business models and scenarios, creating extensive market opportunities for multinational enterprises.

Second, China is the only country in the world that encompasses all industrial categories as defined by the United Nations' industrial classification, offering a complete industrial and supply chain that can provide high-quality supplies to multinational companies.

Moreover, China's technological innovation has steadily progressed, and its pool of highly skilled talent ranks among the highest globally, providing robust intellectual support and human resource guarantees for knowledge- and technology-intensive foreign investments.

Currently, a variety of uncertainties and challenges still affect China's high-quality foreign investment. On the one hand, global economic activity remains sluggish, with growth prospects weakening further. Geopolitical conflicts, rising food and energy prices and mounting debt pressures are all contributing to heightened economic headwinds. On the other hand, Western countries are increasingly promoting "decoupling" under the guise of risk mitigation, accelerating the restructuring of global supply chains. This trend is marked by a noticeable shift toward localization and regionalization, resulting in the reshoring of industries, including manufacturing. Therefore, it is essential to maintain a high level of attention to these developments and conduct timely monitoring.

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