Issuing Body: Ministry of Commerce
Issuing Date: February 26, 2010
Effective Date: February 26, 2010
Continuing China's broad, sustained effort to promote investment by Chinese companies in foreign countries, the Ministry of Commerce (MOFCOM) has issued a policy mandate known as the Guiding Opinions on the National Work of Outbound Investment and Cooperation for Year 2010 (Outbound Investment Opinions). While sometimes vague and perhaps overly general, the Outbound Investment Opinions are meant to guide MOFCOM's local counterparts in their efforts to effect the country's so-called "Go Abroad" strategy.
Since China's central government first put forward the "Go Abroad" strategy roughly a decade ago, outbound investment by Chinese enterprises has increased dramatically, in large part because the government has provided strong policy support for domestic enterprises to do so. As reported by MOFCOM in the Outbound Investment Opinions, foreign investment by Chinese companies rose to US$43.3 billion in 2009, while turnover for contracted projects abroad hit a record of US$77.7 billion, and turnover for outbound labor services reached US$8.9 billion.
Overall Forecast for Outbound Investment in 2010
As developed countries gradually recover from the worldwide economic crisis and emerging economies improve, MOFCOM deems the environment for outbound investment in 2010 to be significantly better than it was in 2009. On the other hand, according to MOFCOM's analysis, trade and investment protectionism are spreading worldwide, and the risks of trade and investment in certain countries and regions is accordingly increasing. Domestically, the Chinese economy continues to grow, and the demands for investment and trade abroad are increasing.
Objectives of Outbound Investment for 2010
In the Outbound Investment Opinions, MOFCOM establishes the following primary goals for outbound investment in 2010: non-financial outbound direct investment will rise to US$46 billion, outbound contracted projects will continue to increase rapidly, and cooperation in the provision of outbound labor services leads to stable and healthy development in that sphere.
Key Points of Emphasis
Promote Healthy Development of Outbound Investment
The Outbound Investment Opinions direct MOFCOM's local counterparts to guide domestic enterprises to take full advantage of favorable policies and provisions in bilateral free trade agreements; encourage industries such as manufacturing, technology, alternative energy and service outsourcing to participate in outbound investment; and support enterprises to invest in international famous brands, advanced technology, distribution networks, and research and development institutions.
Promote Development of Contracted Projects
The Outbound Investment Opinions encourage support for Chinese enterprises to contract for technology-intensive and capital-intensive outbound projects; call for the strengthening of cooperation between central state-owned enterprises and local enterprises; and seek to strengthen ties to adjacent developing countries in order to promote cooperation in the construction of infrastructure there.
Promote Construction of Offshore Economic and Trade Cooperation Zones
Since 2006, as a key element of its Go-Abroad strategy, China's central government has promoted the relatively new concept of economic and trade cooperation zones in foreign countries. There, with the fiscal and policy support of the Chinese government, large Chinese companies establish bases for manufacturing, logistics, and trading. Those bases can be and are used by other Chinese companies.
Offshore economic and trade cooperation zones are processing areas or scientific, technological or industrial parks constructed by domestic enterprises. They may also be areas in which domestic enterprises participate in construction under the government's planning and leadership. The Outbound Investment Opinions stipulate that offshore processing zones and scientific, technological, and industrial parks should have a sound infrastructure, complete industrial chains and a strong sphere of influence. Offshore economic and trade cooperation zones have been established by Chinese enterprises in such countries as Russia, Cuba, Pakistan, Cambodia, and Zambia, focusing on industries such as mineral resources, wood, trading, and home appliance production.
The Outbound Investment Opinions require the formulation of comprehensive policies and measures, as well as the strengthening of bilateral cooperation between governments, in the hope of providing enterprises that build offshore economic and trade cooperation zones with investment services and assurance that sufficient systems are in place for them to succeed.
Improve Services of the Chinese Government
The Outbound Investment Opinions require the Chinese government to improve the Information Service System for Outbound Investment and Cooperation and to update the Guidebook of Countries and Regions for Outbound Investment and Cooperation, the Environmental Assessment Report of Countries and Regions for Outbound Investment and Cooperation, and the Catalogue of Industrial Guidance of Countries and Regions for Outbound Investment and Cooperation.
MOFCOM has issued two sets of such guidebooks since April 2009, covering 20 and 55 countries and regions, respectively. The guidebooks provide basic information about different countries and regions, point out problems Chinese enterprises could potentially confront in the course of investment, and provide necessary tips and suggestions.
MOFCOM issued the Catalogue of Industrial Guidance of Countries and Regions for Outbound Investment and Cooperation in 2004. It lists various industries in which Chinese enterprises are encouraged to invest in different countries and regions. The main purposes of the catalogue are to optimize outbound investment and avoid blind outbound investment and competition between and among Chinese enterprises.
Regulate Outbound Business Activities and Establish Good and Healthy Images
In places, the Outbound Investment Opinions is filled with platitudes—but it nevertheless reflects MOFCOM's (and the Chinese central government's) ambitious goal of fostering and supporting Chinese domestic enterprises as they grow into multinational corporations. Thus the opinions direct enterprises to fulfill social responsibilities, do business in accordance with local laws and regulations, and respect religious customs.
Conclusion
The rising tide of outbound investment by Chinese enterprises in the past few years has occurred partly because of the strong, favorable policies and measures enacted by the Chinese government. But legislation and policymaking in relation to outbound investment are still in their infancy. The success of Chinese enterprises abroad is, in turn, requiring yet more favorable rules and policies, as well as institutional support. Toward that end, the central government and agencies such as MOFCOM are expected to issue still more rules and policies.