NDRC urges FDI to go west in six specific industries
China is encouraging foreign direct investment (FDI) in its western regions in six specific industries: energy and chemicals; finance; mining; production of agricultural by-products, including diary and sugar; manufacturing; hi-tech; and tourism. This is just another part of the continued push by Beijing to move FDI out of the heavily developed coastal areas and into interior of the country.
The Go West campaign in 1999 and 2004’s Go Inland campaign saw China use massive tax incentives to encourage foreign investment, and while the recently released unified corporate income tax does not mention these campaigns specifically, it is highly likely that the current preferential tax policies for development in these encouraged areas will remain. Thanks to this, the western region’s combined GDP reached 3.33 trillion yuan (US$432 billion) in 2005, up from 1.66 trillion yuan in 2000.
As China Daily reports:
Wang Jinxiang, vice-minister of the National Development and Reform Commission, said in a recent interview with People’s Daily: “As far as the western region is concerned, China has thrown open the door to foreign investors, by granting preferential policies and lowering the investment threshold.”
Wang said that although the region has made progress over the past six years, it remains vulnerable due to a lack of foreign investment and a sound industry structure.
Foreign investment in the region accounts for just 3 percent of the total for the nation as a whole, he said.
Wang, who also heads the Western Development Office under the State Council, said: “Opening up the western region to overseas investors is key to its rapid and sustainable growth.”
As we pointed out in our November 2006 issue of China Briefing, for retail operations such as Wal-Mart and Carrefour, the central and western regions, with their massive population, are a fertile playing ground. International commodities manufacturers such as Mittal steel, ensuring its dominance over global steel supply, have made a strategic investment in the region. In time, businesses supplying such industries may begin to enter the central and western regions. Yet for export-based businesses, the burden of of increased transportation costs still seems like a bridge too far until competition, the breaking of existing monopolies, and an increase in transportation infrastructure can start to bring those costs down.
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