Li Jiao
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On 12 March 2021, China’s National People’s Congress published the “Outline of the 14th Five-Year Plan (2021-25) for National Economic and Social Development and Long-range Objectives Through 2035” (“14th FYP”). The 142-page 14th FYP consists of 19 chapters and 65 sub-chapters, covering everything regarding the economic and social development plan for the next five years. In this article, we will focus on some key points in the plan and what these mean for foreign investors.
As you can understand from the title, every five years, the Chinese government will draft a Five-Year Plan to pre-determine the government’s economic targets and policy priorities for the next five years. The Five-Year Plan is the core of China’s centrally planned economy. This plan not only focuses on the domestic side but also indicates China’s foreign policy orientation, providing principal guidelines for local governments when dealing with foreign investment projects.
China will push further towards opening-up
Considering that China is currently facing increasing trade tensions and external challenges, the Chinese government has lowered the expectations for future external growth, and thus bringing forward the “Dual Circulation Strategy” as the main theme of the 14th FYP. The key point of this strategy is to expand the domestic market and boost domestic demands. However, this does not mean that China will shut its doors to the international market and foreign inventors. On the contrary, China has emphasized its will to push further towards opening-up to foreign investment in the 14th FYP.
On 1 March, the Ministry of Commerce ("MOFCOM") also issued a new official document which sets out 22 specific measures aimed to stabilize foreign investment in 2021. This document stipulated that more government support shall be given to speed up the development of foreign investment projects, covering aspects of land use rights, energy projects and financial resources. In addition, the Chinese government will also research the possibilities for further opening-up to foreign investment in Chinese listed companies. This will loosen the restrictions on foreign inventors, regarding shareholding qualifications, shareholding ratio and the lock-up period.
MOFCOM also confirmed that there will be a specific plan published at a later date to support and develop foreign investment during the 14th FYP period. This plan envisions to lower industry-entry barriers for foreign investment other than the negative list and aims to open-up in automobile, finance sector and other industries in the near future.
Customized development plan for different regional city clusters
Regional city clusters play a primary role in China’s economic system. The Jing-Jin-Ji Metropolitan Region, also known as the Beijing, Tianjin, and Hebei Capital Economic Zone, with Shanghai as its center, and the Southern Greater Bay Area that combines Guangzhou and Shenzhen, are all ‘engines’ to China’s economic development. The 14th FYP further emphasized the priority position of these regional city clusters by designing a customized development plan and strategies for them.
According to the 14th FYP, the development strategies of the Jing-Jin-Ji Capital Region will focus on the decentralization of Beijing, which means Beijing will focus on its political function as the capital city, but some non-capital functions of Beijing will be relocated to its nearby areas such as Xiong’An New Area. In this scenario, it’s therefore interesting to keep an eye on investment opportunities in these neighboring areas of Beijing.
Meanwhile, the area of the Yangtze River Delta has been allocated a clear development topic for the next five years which is: “Green Industry”. The Tesla factory in Shanghai already responded to this trend, and in the future, this Green Development Zone will expand in the Yangtze River Delta area, becoming the center for the green industry. Investment projects regarding green energy, green technology and environment protection will get priority in this area.
The 14th FYP also stipulates that innovation should be at the center of the country’s efforts. Since the Chinese government is facing foreign government restrictions on technology transfer to China, China is eager to develop its own high-tech industries such as chip manufacturing and to complete its domestic high-tech supply chain to achieve scientific and technological self-reliance. The Southern Greater Bay Area has been selected as China’s high-tech center, focusing on R&D and technology innovation. Based on the above, foreign investment opportunities in the high-tech area are highly encouraged.
Rising industry sectors that enjoy policy priorities
Based on our observations, the development of the industry sectors mentioned below seem to enjoy policy priorities in the 14th FYP period.
Summary
In light of China’s focus on an expanding domestic market and loosening restrictions for foreign investment in certain areas, the 14th FYP period (2021-2025) can be considered as a favorable time for foreign inventors to start their business in China. However, taking into consideration that this will be a period of economic shifting in China, a clear vision of the rising industry sectors and its policy priorities as well as choosing the right area to start the business will substantially increase the chance of success.
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