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August 19, 2013

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Home » Business » Finance

China seeks end to FDI law in FTZs

China hopes to suspend its laws governing foreign investment in proposed free trade zones, the Cabinet said, in a sign the world’s second-biggest economy could open further to foreign competition.

The State Council will ask senior members of the National People’s Congress for the power to suspend laws and regulations governing both foreign-owned companies and joint ventures between Chinese and foreign companies in free trade zones, including Shanghai, it said on its website.

The move is aimed at “accelerating transformation of the government’s role ... and innovating ways of (further) opening up (to foreign investment),” according to the statement yesterday. It set no timetable, and gave no further details.

Foreign direct investment in China slowed in 2012 but reversed its decline in the first quarter of this year as confidence improved.

China attracted US$38.3 billion in foreign direct investment in the first four months of 2013, up 1.2 percent from the same period in 2012.

The country’s new leaders have signaled they are determined to accelerate the process of making the yuan fully convertible over the next few years in order to boost the currency’s use in trade and support wider financial reforms.

Shanghai will test yuan convertibility and cross-border capital flows in the free trade zone pilot program.

The city officials are keen to experiment with freeing up the capital account and yuan convertibility, fearing the city could be left behind as rival centers, such as Hong Kong and Taiwan, and to develop cross-border yuan financial services.

Shanghai stepped up lobbying efforts after the 2012 creation of a special trade zone in Qianhai, near the southern boomtown of Shenzhen and across from Hong Kong, where yuan convertibility is being tried.

The Qianhai zone, administered by the People’s Bank of China, lets banks from Hong Kong offer cross-border yuan-denominated loans to mainland enterprises.



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