CHARLES CHEUNG'S BLOG

Nov 13th 2006

From the Economist Intelligence Unit ViewsWire

China wants higher-quality foreign investment

China's top economic planning agency has released a blueprint on foreign direct investment (FDI). The document, which outlines the broad policy intentions of the government for the next five years, highlights the need for China to shift to a "quality, not quantity" approach in attracting FDI. However, "quality and quantity" is probably a more realistic goal for China's policymakers, and it is uncertain how much weight the new policy statement will carry beyond emphasising broad goals that are already well documented.

FDI Foreign Direct Investment 外国直接投资

intention 意图, 目的

The National Development and Reform Commission (NDRC) announced its FDI policy for the 11th Five-Year Plan (FYP) on November 9th. FYPs are a legacy of pre-reform communist central planning, but continue to play a crucial role in setting the direction of national economic policy. By explicitly linking foreign investment to the latest FYP (which covers the period 2006-10), the commission is in effect issuing a reminder that policy towards FDI hereafter will be in line with the objectives of the full plan.

National Development and Reform Commission (NDRC)国家发展与改革委员会（法改委）

Five-Year Plan (FYP) 五年计划

legacy 遗产

communist n.共产主义者, 共产党员

                 adj. 共产主义者的

play a crucial role in …

set the direction of …

in effect 有效

hereafter adv.今后, 从此以后

be in line with

Changing priorities

Given that those objectives, released in late 2005 and formally endorsed at the National People's Congress in March this year, stressed the need to move away from the growth-at-all-costs approach of recent years and to promote sustainable economic development, it is hardly surprising that the NDRC's latest remarks follow a similar theme. The key point is raising the quality of FDI, which the NDRC says will entail promoting foreign investment in higher-valued-added sectors, discouraging the indiscriminate pursuit of FDI by local governments, and applying stricter environmental standards to FDI proposals. The government will seek to encourage investments that introduce advanced technology or have significant research and development components, and will give less emphasis to low-value export-processing and assembly-type manufacturing.

priority 先, 前, 优先, 优先权

endorse签注(文件), 认可, 签署

National People's Congress 全国人民代表大会

entail vt. 使必需, 使蒙受, 使承担, 遗传给

indiscriminate 不分皂白的, 不加选择的

pursuit 追击

proposal 提议, 建议

low-value

export-processing

assembly-type

Continuing the sustainability theme, investments will not only be scrutinised more closely for their environmental impact but will also be actively encouraged in the field of environmental protection--suggesting perhaps that nascent carbon-trading initiatives will gain a higher profile, or that the authorities will attempt to use FDI to supplement domestic spending on waste-treatment facilities (the costs of which often discourage domestic companies and local governments from complying with environmental regulations).

scrutinise/scrutinize 细察

nascent 初生的

initiative 主动

profile 剖面, 侧面, 外形, 轮廓

supplement n.补遗, 补充, 附录, 增刊

                  v.补充

However, despite its tone the new announcement is unlikely to herald the abandonment of efforts to attract FDI in great volume. Indeed, the Economist Intelligence Unit forecasts that FDI inflows, though not rising dramatically on their 2005 level, will hover at something over USbn a year for the next five years.

tone n.音调, 音质, 语调, 色调, 状况, 品质, 语气, 气氛

       vt.调和, 增强, 以特殊腔调说, 配合, 定音调

       vi. 颜色调和

herald n. 使者, 传令官, 通报者, 先驱, 预兆

          vt. 预报, 宣布, 传达, 欢呼

abandonment 放弃

inflow

hover 盘旋

There are several reasons why China is likely to continue to pursue "quantity" in FDI, while paying lip service to the notion of more efficient use of foreign capital. The first is that encouraging investment in higher-value-added sectors and continuing to attract capital to low-level, labour-intensive manufacturing are not mutually exclusive. Abandoning the latter will not necessarily help China to achieve the former. The second, related, reason is that even low-grade FDI will arguably continue to be welcome in China because over the next few years the country will need to create jobs for hundreds of millions of underemployed migrants to the cities. The Communist Party recognises the importance of this, and is therefore unlikely to undermine efforts to attract foreign investment except in cases where they grossly conflict with the "quality first" philosophy. In any event, local governments may well remain gung-ho in their attempts to attract FDI, and will try to get away with ignoring central directives whenever they can.

pursue 追赶, 追踪, 追击, 继续, 从事

lip  n.  嘴唇 边，缘

     adj.口头上的; 不真诚的

notion 概念, 观念, 想法, 意见, 打算, 主张, (复数)<美语>小饰物

mutually 互相地, 互助

migrant 候鸟, 移居者

undermine 破坏

grossly  非常, 粗, 很

gung-ho <美>同心协力的, 强烈的, 雄心壮志的

get away with 侥幸成功, 逃脱处罚

directive 指示

Incipient economic nationalism?

Nonetheless, the NDRC's comments suggest incipient shifts in the government's thinking that may be of concern to foreign companies. There have already been signs of such shifts in recent months, including a minor backlash against the foreign investments in banking that occurred last year. Of the USbn in FDI China received in 2005, around USbn was for foreign banks' purchases of stakes in large state-owned commercial banks. Apparently, the NDRC report warns that foreign firms' acquisitions are creating "emerging monopolies". The commission therefore says future mergers in sensitive sectors will face closer scrutiny, and more legislation on foreign takeovers will be introduced.

incipient 初始的

nonetheless 虽然如此, 但是

comment 注释, 评论, 意见

backlash 反斜线(\), 后座, 后冲

stake A share or an interest in an enterprise, especially a financial share.

        股份指企业的股份，尤指金融股

acquisition 获得, 获得物

monopoly 垄断, 垄断者, 专利权, 专利事业

scrutiny 详细审查

legislation 立法, 法律的制定(或通过)

takeover 接收；接管

Two notable recent cases that perhaps show an increase in protectionism concern the difficulties foreign buyers have had in effecting takeovers of Chinese firms. Carlyle Group, a US private-equity fund, recently had to scale back its plans to buy 85% of Xugong Group Construction Machinery, the country's largest construction-equipment maker, agreeing to buy half instead. And some reports suggest that only a 20% stake in Guangdong Development Bank will be sold to one of the two investor consortiums—headed by Citibank of the US and Société Générale of France respectively—that previously were vying with each other to buy a majority stake in the bank.

protectionism 保护主义

private-equity fund

scale n. private-equity fund

        vt. 依比例决定,攀登,测量

        vi. 剥落,生水垢,重,攀登,衡量

consortium 社团, 协会, 联盟, (国际)财团, [律]配偶的权利, <美>大学联盟协定

vying 竞争的

vie 竞争

Although China's FDI regime is likely to remain quite liberal by the standards of many of its Asian neighbours, there are increasing (if still small) signs that China intends to erect more barriers to FDI or that it will, at the very least, from time to time delay foreign efforts to buy large stakes in Chinese companies in high-profile sectors. If taken to extremes, particularly if stricter environmental assessments also appear to discriminate against foreign manufacturers, this more zealous regulation of FDI could land China in trouble with the World Trade Organisation or create other trade tensions. As for services industries, the NDRC is also quoted as saying that China will open these sectors in line with its WTO commitments but that it will do so in a "prudent" manner—which of course could be interpreted to mean that China, though ostensibly following WTO rules, will try to get away with as much as it can in terms of protecting key domestic sectors.

regime 政体, 政权, 政权制度

erect adj. 直立的, 竖立的, 笔直的

        vt. 盖, 使竖立, 使直立, 树立, 建立

        vi. 生理]勃起

extreme 极端, 极端的事物

assessment (为征税对财产所作的)估价, 被估定的金额

discriminate 歧视, 区别, 区别待遇

zealous 歧视, 区别, 区别待遇

in line with

prudent 谨慎的

ostensibly 表面上

Tax worries

A further cloud on the horizon for FDI in China is the prospect that many of the tax breaks that foreign-invested companies currently enjoy may disappear when the government unifies tax rates. This reform, although long delayed, is expected to take effect in 2007 or 2008, after which foreign companies will be taxed at the same rate as Chinese companies; currently foreign firms face effective tax rates that are, on average, about half those paid by their Chinese counterparts. With rising operating costs and the ever-present risk of trade litigation against China already causing foreign companies to consider relocating some of their operations to other countries (like Vietnam), there are concerns in the foreign business community about the impact higher taxes could have on their competitiveness.

Potentially, this could dampen FDI inflows into China. More likely, China's authorities will use tax harmonisation as a further tool to direct FDI into priority sectors, by maintaining or increasing tax incentives in the industries they want to promote while eliminating those in unfavoured or overcrowded sectors. Despite small hints of increasing economic nationalism, it is still important for China to remain attractive as a destination for FDI. Although FDI itself makes up only around 10% of total investment, it has a disproportionate influence on the crucial export sector. In 2005 foreign-invested firms accounted for 58% of China's exports.

on the horizon

prospect 景色, 前景, 前途, 期望

tax break 减税

take effect 见效, 生效  开始发生作用  实施, 实行

litigation 诉讼, 起诉

dampen 使潮湿, 使沮丧

harmonisation  调和化, 一致, 融洽

priority

incentive 动机

hint 暗示, 提示, 线索

disproportionate 不成比例

proportion n.比例, 均衡, 面积, 部分

                vt. 使成比例, 使均衡, 分摊

proportionate adj. 成比例的

                    v. 成比例

China may indeed be signalling that it is about to moderate its gung-ho pursuit of FDI of recent years, but foreign investors will no doubt continue to play a big part in the country's plans.

moderate adj.中等的, 适度的, 适中的

               v. 缓和