Commercial authorities of provinces, autonomous regions, municipalities directly under the central government, cities under separate planning, and the Xinjiang Production and Construction Corps; national-level economic and technological development zones:

In 2007, the national business system, driven by a strong sense of mission and responsibility, worked diligently and proactively, and achieved remarkable results in attracting foreign investment through joint efforts with relevant departments. To fully implement the spirit of the 17th National Congress of the Communist Party of China, put into practice the Scientific Outlook on Development, and achieve high-quality and rapid growth in attracting foreign investment, we now offer the following guiding opinions for the nationwide effort to attract foreign investment in 2008:

I. Status of Foreign Investment Absorption in 2007

In 2007, China’s nationwide absorption of foreign investment showed a positive trend characterized by structural optimization, improved quality, and rapid, high-quality development. Foreign-invested enterprises placed greater emphasis on R&D as well as energy conservation and environmental protection, and the social benefits of foreign investment were significant. Throughout the year, 37,888 new foreign-invested enterprises were approved, with actual utilized foreign investment reaching 83.5 billion U.S. dollars, representing a year-on-year increase of 15%. Among these, 37,871 new foreign-invested enterprises were established in non-financial sectors (excluding banking, insurance, and securities), with actual utilized foreign investment totaling 74.8 billion U.S. dollars, up 14% over the previous year. The following characteristics were evident:

The industrial structure of foreign-invested enterprises has continued to optimize. The share of foreign investment absorbed by the service sector has risen. In the non-financial services trade sector (classified according to WTO sectors), the amount of actual utilized foreign investment showed strong growth, increasing by 57.14% and accounting for 41% of the nation’s total actual utilized foreign investment in the non-financial sector—a rise of 11 percentage points compared to 2006. By contrast, actual utilized foreign investment in the manufacturing sector declined by 4.6% year-on-year, accounting for 55% of the nation’s total actual utilized foreign investment in the non-financial sector, a decrease of 3 percentage points in its share. Over 40% of newly established manufacturing enterprises belong to capital- and technology-intensive industries such as the manufacture of communication equipment, computers and other electronic devices, special-purpose equipment manufacturing, electrical machinery and equipment manufacturing, general-purpose equipment manufacturing, and transportation equipment manufacturing. Among certain high-tech industries, actual utilized foreign investment grew relatively rapidly: in special-purpose equipment manufacturing, the amount of actual utilized foreign investment reached 2.313 billion U.S. dollars, up 22.79% year-on-year; in general-purpose equipment manufacturing, the amount of actual utilized foreign investment totaled 2.152 billion U.S. dollars, an increase of 10.01% over the previous year.

The actual utilization of foreign investment in the central and western regions has been growing rapidly. Since the launch of the “Ten Thousand Merchants Go West” initiative over a year ago, the actual utilization of foreign investment in the central and western regions has increased by 37% and 60%, respectively—far exceeding the 10% growth rate seen in the eastern region. These two regions now account for 7% and 5% of the nation’s total actual utilization of foreign investment in non-financial sectors, with the western region recording its highest growth rate in recent years. The share of foreign investment absorbed by the central and western regions nationwide has each risen by one percentage point.

Foreign-invested enterprises are performing well. In 2007, the industrial output value (at current prices) of foreign-invested enterprises reached 12,503.694 billion yuan, representing a year-on-year increase of 24.4% and accounting for 30.9% of the nation’s total industrial output value (at current prices). Foreign-invested enterprises recorded foreign trade volume totaling 1,254.928 billion U.S. dollars, up 21.08% over the previous year, and accounting for 57.73% of the nation’s total foreign trade volume. Among this, exports by foreign-invested enterprises amounted to 695.52 billion U.S. dollars, an increase of 23.36% over the previous year, representing 57.1% of the nation’s total exports. Exports of high-tech products reached 287.432 billion U.S. dollars, up 15.95% year-on-year, accounting for 86.67% of the nation’s total exports of high-tech products. Exports of electromechanical products totaled 508.4 billion U.S. dollars, up 24.81% year-on-year, representing 72.5% of the nation’s total exports of electromechanical products. The number of people directly employed in foreign-invested enterprises exceeds 42 million.

II. The Situation Facing the Work of Attracting Foreign Investment in 2008

From the perspective of the domestic situation, China’s national economy continues to develop steadily and sustainably. The state has adopted a series of measures to strengthen and improve macroeconomic regulation, thereby preventing large fluctuations in the economy. Policy measures aimed at expanding domestic demand are being continuously introduced, and domestic market demand is growing stronger and stronger. The newly revised and implemented “Guidance Catalog for Foreign Investment Industries” further broadens the sectors that encourage foreign investment, which will help China continue to attract foreign investment at a certain scale. At the same time, pressures from inflation and trade imbalances are increasing, and bottlenecks related to resources and the environment are becoming increasingly evident. The impact of ongoing policy adjustments on foreign investment and enterprise production and operations remains unclear. New requirements have been put forward for attracting foreign investment, focusing on enhancing independent innovation capabilities, promoting energy conservation and environmental protection, intensively utilizing resources such as land, safeguarding workers’ rights and interests, and protecting intellectual property rights.

From an international perspective, the global economy is expected to remain on a growth trajectory, though its pace of expansion is slowing and uncertainties are on the rise. Multinational corporations are accelerating the establishment of regional headquarters, R&D centers, and the transfer of advanced technologies; international industrial shifts are trending toward higher value-added sectors; service outsourcing is booming; and cross-border mergers and acquisitions are becoming increasingly active. Regional and subregional cooperation continues to deepen, and the overall degree of investment facilitation is improving. Meanwhile, the U.S. subprime mortgage crisis is still unfolding, and its impact on the global economy deserves close attention. International oil and food prices continue to climb, the U.S. dollar remains in a prolonged downward trend, and developing countries are concerned that volatile international capital flows could trigger risks of asset bubbles. Protectionism in trade and investment is intensifying, and there remains uncertainty about whether the scale of international investment will continue to rise steadily.

Based on the above analysis, both the international and domestic situations are generally favorable for China’s efforts to attract foreign investment in 2008; however, they will also pose certain challenges. We need to further transform our approach to foreign investment development, continuously improve the investment environment, proactively adapt to the new situation, and achieve scientific development.

III. General Requirements for Attracting Foreign Investment in 2008

Fully implement the spirit of the 17th National Congress and the Central Economic Work Conference, put the Scientific Outlook on Development into practice, persist in expanding opening-up to the outside world, innovate approaches to utilizing foreign investment, optimize the structure of foreign investment utilization, and leverage the catalytic role of foreign investment in fostering independent innovation, industrial upgrading, and coordinated regional development, continuously enhancing both the quality and level of foreign investment utilization. Strengthen our sense of the bigger picture and service orientation, coordinate with macroeconomic regulation and control, and respond appropriately to changes in both the international and domestic situations. Continue to optimize the investment environment, enhance our international competitiveness in attracting foreign investment, maintain steady growth in foreign investment inflows, and achieve high-quality and rapid development in the utilization of foreign investment.

IV. Key Tasks for Attracting Foreign Investment in 2008

(1) Implement the spirit of the 17th National Congress and continue to expand opening up to the outside world.

Earnestly study and fully implement the spirit of the Report to the 17th National Congress and the Central Economic Work Conference. Thoroughly summarize and publicize the experiences and achievements made over the past 30 years of reform and opening-up in attracting foreign investment. Further enhance our understanding of the significance and role of attracting foreign investment in the new era, and conduct research to propose new ideas and initiatives for expanding opening-up and improving the work of attracting foreign investment under the new circumstances.

(2) Implement the Scientific Outlook on Development and shift the approach to attracting foreign investment.

In attracting foreign investment, greater emphasis should be placed on energy conservation and emission reduction, efficient and intensive land use, independent innovation, and fulfilling social responsibilities, guiding foreign investment in accordance with the Scientific Outlook on Development. Localities should, based on their specific conditions, study and formulate appropriate policies and measures, setting new targets and requirements for foreign investment. The eastern regions should accelerate institutional and mechanism innovations, take the lead in shifting the mode of foreign investment development, and strike a proper balance among attracting foreign investment and protecting the environment, promoting efficient resource utilization, upgrading industrial structures, and fostering social harmony. They should also make good use of the opportunities presented by the new round of international industrial transfer to comprehensively enhance their participation in global division of labor and competition. The central and western regions should continue to expand their opening-up, strengthen infrastructure development and talent training, strive to improve their capacity to attract investment, and actively take on industrial transfers from the eastern regions.

(3) Rationally guide foreign investment toward appropriate sectors, fully leveraging the role of foreign investment in promoting industrial upgrading and independent innovation.

Implement the newly revised “Guidance Catalog for Foreign Investment Industries,” and encourage foreign investment in high-tech industries such as equipment manufacturing and new materials production. Actively support the country’s macroeconomic regulation and continue to strengthen the management of foreign investment in sectors including steel, cement, electrolytic aluminum, and real estate. Strictly restrict the transfer of high-energy-consuming and high-emission industries into China. Encourage foreign-invested enterprises and foreign-funded R&D institutions to engage in original innovation and increase the localization rate of intellectual property rights. Through industrial and fiscal policies, encourage foreign-invested enterprises to step up R&D investment on the basis of introducing advanced technologies, enhance their process and technological capabilities, promote independent upgrading of technologies and products, and achieve the cycle of introduction, digestion, absorption, and re-innovation. Encourage multinational corporations to collaborate with Chinese enterprises and research institutes, guide local supporting enterprises to partner with industry leaders, and strengthen integrated innovation.

(4) Actively undertake international service outsourcing and enhance the development level of modern service industries.

Continue implementing the “Thousand, Hundred, Ten Project” for service outsourcing, fully carry out the co-construction agreements for service outsourcing base cities, demonstration parks, and training centers, refine relevant accreditation standards as well as fiscal, tax, and financial policies, and actively promote talent training, enterprise qualification certification, international market development, public information technology services, and intellectual property protection. Further encourage multinational corporations to shift their global outsourcing operations to China. In light of international industrial transfer trends and China’s domestic economic development conditions, continue guiding foreign investment toward productive service sectors such as business services and logistics, as well as social service sectors focused on improving people’s livelihoods. Strengthen guidance and regulation of foreign investment entering the real estate sector.

(5) Strengthen investment cooperation among regions and promote coordinated regional development.

Pragmatically advance the “Ten Thousand Enterprises Go West” initiative, and ensure the timely revision and implementation of the “Catalog of Advantageous Industries for Foreign Investment in Central and Western Regions.” Learn from and draw on advanced international experiences by establishing industrial transfer promotion centers in the Yangtze River Delta and the Pearl River Delta, and setting up demonstration parks for industrial transfer reception in central and western regions. Promote the establishment of paired cooperation mechanisms for industrial transfer between coastal cities and cities in central and western regions. The eastern region should integrate industrial transfer with adjustments to industrial structure, upgrading industrial levels, and optimizing industrial layouts. It should proactively assist and guide enterprises with higher costs to relocate to central and western regions, thereby freeing up space and resources for the development of high-level, high-quality industries. The central and western regions should fully leverage their local advantages, actively strengthen alignment and coordination with the eastern region, and at the same time, take into account resource and environmental carrying capacity, strictly controlling the transfer of outdated production capacities that are energy-intensive and highly polluting to central and western regions.

(6) Innovate approaches to utilizing foreign investment and expand channels for attracting foreign capital.

Encourage foreign investors to establish venture capital enterprises, improve the exit mechanisms for venture capital investments, and support the growth and development of domestic small- and medium-sized high-tech enterprises. Guide foreign-invested enterprises that meet the relevant conditions to list on the domestic stock market. Encourage foreign investors to participate in the restructuring and transformation of state-owned enterprises through mergers and acquisitions and other means. Strengthen coordination and cooperation with relevant departments, establish and refine a monitoring system and review mechanism to safeguard national industrial security, and effectively regulate foreign investment mergers and acquisitions. Improve policy measures, fully leverage the Clean Development Mechanism, and encourage enterprises with significant emission reduction potential to collaborate with international investors, thereby gaining access to advanced technologies and financial resources for energy conservation and emissions reduction.

(7) Actively build a harmonious development zone and fully leverage its role in industrial agglomeration and demonstration-driven effects.

As soon as possible, issue the “Regulations on National-Level Development Zones,” and uphold the advantages of the streamlined and efficient management committee system characteristic of national-level development zones. Improve the comprehensive evaluation indicator system for the investment environment in national-level development zones, strictly enforce the state’s policies on saving and intensive land use, encourage national-level development zones to develop high-tech industries, promote industrial agglomeration and upgrading, and build eco-industrial parks. Promote the establishment of cross-regional, mutually beneficial cooperation among development zones in the eastern, central, and western regions, based on capital ties; deepen mechanisms for cooperation and exchange between development zones in the eastern region and those in the central and western regions; and better leverage the exemplary and driving roles of national-level development zones in the open economy.

(8) Continue to improve the investment environment and enhance the international competitiveness of attracting foreign investment.

The domestic and international environment poses significant challenges to China’s ability to maintain its competitive edge in attracting foreign investment. To address these challenges, it is essential to genuinely transform government functions, further promote transparency in government affairs, enhance administrative efficiency and the rule of law in governance, and improve the complaint mechanism for foreign-invested enterprises. This will help investors build confidence in long-term investments, continuously attract new enterprises to set up operations in China, and encourage existing enterprises to increase their capital and expand their businesses, thereby fostering a business-friendly and secure environment. We must also earnestly protect intellectual property rights, improve service quality, create a market environment characterized by fair competition, and ensure a stable and predictable legal, regulatory, and policy framework.

(9) Improve investment promotion methods and advance investment facilitation.

We must earnestly rectify the practice of vying with each other to offer preferential policies and cascading target assignments in investment promotion, and accelerate the shift from “attracting investment” to “selecting high-quality investments.” We should refine a multi-level investment promotion mechanism, fully leverage the role of intermediary agencies, and carry out targeted, small-scale, specialized investment promotion efforts. We should make full use of intergovernmental investment promotion agencies to expand exchanges and cooperation with our major sources of foreign investment in fields such as modern services, energy conservation and environmental protection, and high technology. We should establish an evaluation system for foreign investment that aligns with the Scientific Outlook on Development, and vigorously encourage foreign-invested enterprises to better fulfill their social responsibilities.

General Office of the Ministry of Commerce of the People's Republic of China
March 6, 2008