China Relaxes Rules On Foreign Investment, Lowers Asset Requirements

China will relax rules for foreign investment, increasing its market appeal to global investors and signaling its determination to continue with its opening up policy.

The country’s Ministry of Commerce (MOC) has made public its plan for formulating regulations and laws in 2021, placing its agenda on the revision of the guideline on foreign strategic investment in Chinese listed firms.

The revision seeks to “ease restrictions on foreign strategic investment, and introduce innovative supervision approaches for the sector,” the MOC said in a recent statement.

MOC came to contention that the guideline which was issued 15 years ago can no longer be applied to the current demand of foreign investment attraction, given the country’s rapid development over the years.

Wang Jian, a professor at the University of International Business and Economics, said the revision was a signal to the world, indicating that China will continue its reform and opening-up policy, gradually loosen restrictions on foreign investment in listed firms.

Incidentally a draft revision unveiled last June offered a glimpse of the upcoming rules. According to the document, there will be a lowered asset requirements for investments, it states that foreign investors should either own at least 50 million U.S. dollars or manage no less than 300 million dollars of assets for market entry, compared with the current thresholds set at 100 million dollars and 500 million dollars, respectively.

It also reduced the lock-up period for foreign shareholders’ stocks from three years to 12 months and removed shareholding limits of foreign strategic investment through listed firms’ targeted placements.

Opening up has been frequently brought up by China’s policymakers over the years of its rapid economic growth. Despite a virus-induced economic slowdown across the world, the country’s opening-up momentum has remained unabated.

China has taken several major steps to open its door wider since last year: implementing the Foreign Investment Law, trimming the negative list for foreign investment and easing foreign access to the financial market.

Based on United Nations Conference on Trade and Development, with a 4-percent growth in foreign direct investment (FDI) inflows last year, and with 38% jump in FDI in the first our month this year, China continues to stand out as the largest recipient of FDI in the world.

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