Foreign investment + Industry standards + Coal chemicals

In this issue of MERICS China Industries, we cover the following topics:

Beijing seeks to mend fences with foreign business
Setting standards for tomorrow's industries today
Controlled burn: China’s new plans for coal chemicals
Make or break for low-carbon tech: Beijing boosts demonstration projects
Greening the Green: NDRC pushes for renewable energy equipment recycling

1. Beijing seeks to mend fences with foreign business

At a glance: As part of a wider private sector charm offensive, the State Council issued opinions on “further optimizing the foreign investment environment.” 24 directives were issued, with the following standing out:

Increase efforts to introduce foreign capital in key areas like biomedicine, modern services and advanced manufacturing
Guarantee national treatment for foreign-invested enterprises
Strengthen the administrative protection of foreign investment and intellectual property rights
Increase financial and tax support

MERICS comment: Due to the country’s post-pandemic economic woes, Beijing is eager to boost investor confidence and court foreign businesses. So far however, the solutions it is proposing appear superficial relative to the macroeconomic and institutional factors ultimately driving the slowdown, such as the excessive reliance on infrastructure and industry-led growth. Instead of accelerating China’s needed structural transformation, so far the State Council is focusing on foreign investment as a short-term stopgap solution.

Foreign business view the proposed measures with a skeptical eye, given the fact that they have been neglected, when not outright mistreated, in recent years. Inbound FDI is already at record low levels. A sense of déjà vu adds to the mood of uncertainty, with many of these measures echoing past broken promises. For instance, the granting of national treatment has been a long-running controversy going back to China’s accession to the WTO. Renewed commitments were already featured in the 2019 Foreign Investment Law to little effect. Whether or not China walks the talk this time will be the crucial question.

Yet, there is some reason for cautious optimism. Specific sectors like biomedicine, internet services and advanced manufacturing are singled out and targeted for investment promotion. China is looking to strategically direct FDI to sectors where it is behind, presenting opportunities to some select foreign industries. Moreover, the policy document calls for measures to “further clarify the specific standards for Made in China” status. These upcoming notices should provide clearer guidelines for foreign companies seeking this privileged label, thereby improving the operational environment.

Article: Opinions of the State Council on Further Optimizing the Foreign Investment Environment and Increasing Efforts to Attract Foreign Investment (国务院关于进一步优化外商投资环境加大吸引外商投资力度的意见) (Link)
Issuing body: State Council
Date: August 13, 2023

2. Setting standards for tomorrow's industries today

At a glance: The Ministry of Industry and Information Technology (MIIT) and three other ministries jointly published a plan to develop standards for new industries. Implementing the standards development outline from 2021, the plan defines eight emerging industries, such as new materials, civil aviation, and new energy vehicles, as well as nine future industries, such as AI, metaverse and quantum technologies. It specifies pilot projects for each industry and defines key tasks for sub-national policymakers. The plan sets overall goals for the next 12 years:

By 2025, over 10,000 companies should be involved in the formulation of standards and participate in setting 300 international standards.
By 2030, China’s standardization system should reach a refined stage, i.e., new industry standards should have gained and expanded technical and international reach and emerging industries should drive the high-quality development of China.
By 2035, China’s standards system should reliably supply standards for high-quality development.