For decades, Chinese authorities have strictly regulated foreign investments. But things have changed a lot, and now China is desperately trying to portray it modernized image to the world. On January 17, 2017, the State Council issued a circular on a new foreign direct investment policy to open up China’s economic system. China’s latest move to open wider its domestic market to overseas financial companies signifies that the country has realized the formative contribution foreign investment could bring. The State Council says it wants China to upgrade its capital base, foster innovation and develop the talents of its labor force. To do this, China will need foreign investment and know-how.
China’s open door policy is a step to open doors wider to foreign investors and offer them wider access to the following areas-
- Medical Services
- New Energy Vehicles
- Elderly Care
- Financial Services
According to Yu Zhang, lead portfolio manager of the Matthews China Dividend fund, This latest step in opening up China’s market sets the stage for a day when American and other foreign investors will have access to a full menu of Chinese domestic stocks. Foreign-invested companies comprised less than three percent of China’s total last year, but they were responsible for nearly half of the country’s foreign trade, more than one-fourth of reported industrial profits and one-fifth of tax revenue
Here is an explanation why overseas companies are eager to invest money in China-
- With 1.3 billion potential customers, China is the biggest internal market in the world
- This country has the lightning-fast growing market with 7% growth per year rate
- Low labor cost and enormous natural resource
- With the development of the Western provinces (particularly, the Sichuan province), China offers new opportunities for the businesses of all sizes
As China pushes for growth relying more on domestic consumption and less on exports, sectors that can help the country achieve high-quality growth are expected to benefit from efforts to open up further, experts said.
It is expected that, China’s open door policy could not only bring in foreign revenue but also encourage more domestic spending.
Exchanging technology with the advanced countries is the primary aim of Beijing for opening up China’s market. Foreign companies will come to China with their knowledge, expertise and efficiency. This will greatly help to enhance the skill of China’s domestic workforce. It is definitely going to boost Chinese competitiveness and enable it to move up the global value chain.