China Enhances Financial Support for Foreign-Funded Enterprises

The Circular on Implementing the Requirements of the State Council and Extending Financial Support to Major Foreign-Funded Enterprises was jointly released by the Ministry of Commerce and the Banking and Insurance Regulatory Commission, in order to enhance financial support for major foreign-funded enterprises. The circular emphasizes that both domestic and foreign enterprises are subject to a unified set of rules, and ensures that foreign-funded enterprises are also eligible for a re-lending and re-discount quota of RMB 1.5 trillion. Foreign-funded enterprises in the key link of the manufacturing industry or those in the business service sector having operation difficulties will be the focus the support program.  

Major foreign-funded companies include, but are not limited to, those specializing in special and general equipment, the electronics and telecommunication equipment sectors, medical devices, chemistry, automobiles, pharmaceutical manufacturing, electronic components and garment manufacturing. They also include companies related to trade and services, such as wholesale, travel, and elderly care, which are experiencing operational challenges, according to the circular.

The circular requires the enhancement of the financial service quality, and ensures that foreign-funded enterprises are also eligible for access to a re-lending and re-discount quota of RMB 1.5 trillion, just like domestic enterprises. Banking institutions should be more active in satisfying the financing demands of major foreign-funded enterprises based on market rules, and should further improve their services and efficiency. Meanwhile, RMB 570 billion worth of new loans from the Export-Import Bank of China can be used to support qualifying major foreign-funded enterprises, so as to offer them diversified and comprehensive financial support. It is also required to play to the strengths of policy-oriented financial institutions, innovate financial products, optimize loan resources, increase the scale of new loans, and implement financial policies more accurately. 

Furthermore, local government agencies must address financial services-related problems that foreign-funded companies face in a more timely manner, and must promote cooperation between foreign-funded companies and financial institutions, the circular added.

Wen Bin, chief researcher at Minsheng Bank, said that the sudden outbreak of the COVID-19 pandemic has dealt a heavy blow to market entities, and also to foreign-funded enterprises in China. China laid out its goal regarding the “six priorities”, in which stabilizing the foreign investment is one piece of key work. It is important to apply the same set of rules to both domestic and foreign-funded enterprises and give foreign-funded enterprises the same treatment and equal supporting policies. 

Wen Bin explained that the circular released by the two government departments aims to solve the financing issues of foreign-funded enterprises and make concrete work arrangements. The policies are accurate and direct enough to reach the foreign-funded enterprises, so as to alleviate the impact of the pandemic on major foreign-funded enterprises. “This indicates China’s policy orientation of openness, which will further attract foreign investment, stabilize the expectations of foreign-funded enterprises, and boost their confidence in China.” 

Wen Bin highlighted the fact that the implementation of a series of supportive policies will help foreign-funded enterprises maintain their operational stability in China, and will consolidate the favorable conditions for work attracting foreign investment. It will also further optimize the structure of foreign investment. 

Data from the Ministry of Commerce shows that from January to November, 2020, China attracted a total of RMB 899.38 billion in foreign investment, up by 6.3% from the previous year. This indicates a continuation in the good conditions seen since the second half of 2019.

China’s foreign investment attraction also performed well, even in the first half of last year when global direct investment fell sharply. A recent UNCTAD report showed that in the first half of 2020, global cross-border investment fell by 49% from last year, while for China, this figure fell by only 4%.  

Zong Changqing, Head of the Department of Foreign Investment, Ministry of Commerce, said that what remains unchanged is the attraction of China’s huge market for foreign investors, the competitiveness of China in terms of industry layout, human resources and infrastructure, and the expectation and confidence of foreign investors investing in China.  

Zong Changqing said that during the 14th Five-Year Plan period, China will open its door wider, shorten the blacklists for foreign investment, and further promote the openness of standards and regulations. The opening up of the Chinese market will provide more business opportunities for foreign investors. 

China has effectively controlled the spread of the COVID-19 pandemic, and its economy has recovered quickly amid the ravages of the global pandemic throughout 2020. It has provided a lifeline for multi-national enterprises conducting business in China. The senior managers of many multi-national enterprises say that the growth in Chinese business has become the main contributor to their business operations in 2020. 

Koldo Arandia, president of Spanish machine maker IBARMIA, said the company’s total revenue would drop by 40% without their business in China. He explained that although some of their target markets saw business drop due to the pandemic, China’s business performed quite well. He also expressed that the Chinese market has climbed to ladder to take the top spot as the biggest market among the company’s top six target markets. 

The Spanish company Fagor Automation has seen the proportion of its China business to total sales rise from 28% in 2019 to 40% in 2020. The digital machine tool business has been growing rapidly, with sales up by 53%. In addition, the Spanish industry software developer Lantek has seen its sales in China up by 19.4%, while its business in Europe is sliding. 

Spanish tool maker EGA Master said during 2016-2020, the company’s global sales increased by 32%, while its sales in China increased by 165%, making China its second-largest target market in the world. The company’s industry manager Iaki Garmendia highlighted the fact that in 2020, the company’s sales in China increased by 21%. He said that in 2021, China will become the largest sales market for EGA Master. 

A survey conducted by the British Chamber of Commerce in China shows that approximately 44% of British enterprises said that they would increase investment in China in 2021. The Japanese Chamber of Commerce and Industry in China had similar survey results, with approximately 40% of Japanese companies stating that they will expand their business in the next 1 or 2 years. The data fully reflects foreign-funded enterprises’ optimism regarding the Chinese market and their willingness to invest more in China. 

Thailand’s Kasikorn Bank has set up branches and offices in Shanghai, Chengdu, Hong Kong, Beijing and Kunming. In June, 2020, Kasikorn Bank founded the Kasikorn Vision Information Technology Limited Company in Shenzhen, with the aim of providing financial technology services for banks. Kasikorn Bank’s VP Cai Weicai said that China has stuck to the principle of equal treatment for both domestic and foreign businesses and is responsive to demands. The Chinese government has also made clear regulations regarding policies for supporting business development, as well as equal participation in standard-making and government procurement. Since the Foreign Investment Law came into effect one year ago, foreign businesses have been more widely involved in the Chinese market. The Chinese business environment has continually been improving towards more openness and transparency. 

Grundfos is headquartered in Denmark and is the world’s leading manufacturer of water pumps. In January 2020, Beijing Intellectual Property Court upheld the decision that Gelanfu and Grundfos are popular trademarks and ordered the defendant to stop using “Grundfos” in its products and company name, and held the defendant accountable for the infringement. Grundfos China CFO John Markmann said that winning this case is very significant for Grundfos, as it will now have strong protections for Grundfos’s trademark and intellectual property rights. “The implementation of the Foreign Investment Law has shown China’s determination in opening-up. The Chinese government has taken many measures to loosen market access, increase imports, enhance intellectual property right protection and create a more attractive business environment. We have great confidence for this new open and innovative Chinese market.” 

Bernard Dewit, Chairman of BCECE (the Belgian-China Chamber of Commerce), said that the Foreign Investment Law has achieved remarkable accomplishments over the past year, as it has effectively protected the legal rights of foreign businesses in China, facilitated free trade and investment, and offered equal supportive policies for foreign businesses. “During the time of the pandemic, many European companies, including those of our association members, chose to stay in China and increased their investment. Many European enterprises have maintained very good communications and cooperation with their Chinese counterparts. This shows that foreign investors are satisfied with China’s improving business environment and are confident about the Chinese economy and market.”