China Launches Initiatives to Attract Foreign Firms to Free-Trade Zones

China has announced a series of measures aimed at attracting foreign companies to its free-trade zones, as the government seeks to bolster investor confidence and stimulate economic growth. The State Council, China’s cabinet, released a document on Thursday outlining plans to trial international trade rules in qualified free-trade zones or ports. The move is seen as a signal that China is gradually opening up its economy to foreign investors.

The decision to lure foreign firms comes as Chinese President Xi Jinping and Premier Li Qiang have emphasized China’s commitment to opening up and have pledged to protect and welcome foreign investors. These efforts are in response to recent industry crackdowns and raids on foreign companies, which have raised concerns among investors and created uncertainty surrounding China’s future growth prospects.

The new measures are designed to align with the rules of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), a trade deal that China applied to join in 2021. The CPTPP was originally promoted by the United States as an economic bloc to isolate China, and China’s application to join is still pending. As global demand weakens and China’s exports decline, the government is keen to foster a favorable environment for foreign investors to stimulate economic activity.

Under the new measures, foreign financial institutions in the pilot areas will be allowed to provide services similar to their Chinese counterparts. Additionally, companies and individuals in these regions will be permitted to purchase overseas financial services. These steps represent a significant opening up of China’s financial sector, which is expected to facilitate smoother operations for multinational corporations operating in the free-trade zones.

May Zhao, Managing Director and Head of Equity Research at Zhongtai Financial International Ltd, believes that the measures relating to the financial sector demonstrate a positive step forward in opening up the Chinese market. She anticipates further guidance on permitting foreign institutions to offer the same services as their Chinese peers in the pilot zones.

According to Frederic Neumann, Chief Asia Economist at HSBC Holdings Plc, these initiatives serve as a stepping stone for overseas firms, allowing them to establish a presence in the free-trade zones and potentially expand their operations to access the broader Chinese economy. Despite the geographical limitations of the zones, the measures are expected to attract foreign companies seeking to tap into the immense market opportunities in China.

The notice also outlined additional highlights of the measures, including permitting cash remittance by foreign investors in the trial regions without delay, banning governments from demanding software source code from developers for import, sale, or use, allowing individuals and companies in the pilot regions to purchase overseas financial services, permitting re-manufactured product imports for key industries, and extending the temporary period of stay for executives of companies planning to set up units in the trial areas to two years.

China’s efforts to attract foreign firms to its free-trade zones demonstrate a commitment to opening up its economy and fostering a favorable environment for foreign investment. These measures not only provide multinational corporations with greater access to the Chinese market but also aim to boost investor confidence and promote economic growth in the face of global challenges and uncertainties.