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Cutting red tape to boost FDI
( 2002-07-25 14:32 ) (3 )

Local governments across China will soon be granted the right to approve overseas investment expansion deals - cutting the red tape that has slowed business expansion.

The latest reform is just one of many major steps to encourage foreign direct investment (FDI), said a central government official who declined to be identified.

Beneficiaries will include overseas firms that plan to increase investment by up to US$30 million in manufacturing sectors.

After giving approval, local governments will only need to notify the Ministry of Foreign Trade and Economic Co-operation (MOFTEC) of their decisions as a matter of record keeping.

Currently the right of approval for an investment expansion rests with MOFTEC, regardless of the scale of the deal.

And requests for investment expansion have faced a lot of bureaucratic hurdles with joint examinations being undertaken by the MOFTEC and the State Development Planning Commission.

The urgency to improve the business environment in China is rising as competition for FDI intensifies.

A report prepared by the MOFTEC admitted that China is facing pressure to step up efforts in improving its business climate. "The new policy would mark a beginning of reform to deregulate supervision over FDI", the official said.

The measures will quicken the approval process for investments below US$30 million in many manufacturing sectors.

But for investment expansion in services, the approval procedures will remain the same as China has not fully opened these sectors, the official said.

The MOFTEC, the State Development Planning Commission and the General Administration of Customs will join hands in carrying out the policies and measures, government sources said.

Other major efforts to improve the business environment include measures to ensure there will be enough officers and facilities at Customs in major ports to handle increasing flow of goods.

The MOFTEC and the State Development Planning Commission conducted a joint investigation in May to get first-hand information on the actual situation.

It found that a serious lack of Customs staff and facilities exists in Tianjin and the provinces of Guangdong, Hubei and Shaanxi.

Dongguan in Guangdong, for instance, exported US$19 billion of goods last year, more than 7 per cent of China's total. Yet Customs staff there account for less than 1 per cent of the country's total.