Foreign businesses have become more confident and optimistic about their development in China, as they believe the government’s determination in fighting corruption will build an internationalized environment featuring the rule of law and the facilitation of investment.
Since late 2012, China has intensified its anti-corruption drive in an effort to purify the market and boost economic growth, which undoubtedly creates a favorable and predictable environment for foreign investment.
Meanwhile, Chinese leaders have reiterated on different occasions that China will protect the legal interests of foreign-funded firms instead of altering its policy of attracting foreign investment.
Wang Guoqing, spokesman for the annual session of the Chinese political advisory body, said Wednesday that the Chinese government is determined to establish a rule-based, internationalized and favorable business environment for inbound foreign investment.
FOREIGN BUSINESSES WELCOME ANTI-CORRUPTION CAMPAIGN
China’s anti-corruption campaign “is generally well received by foreign investors,” said Koh Chin Yee, CEO of Singapore Longus Research Institute.
“It is an all-front campaign,” he said, not only encompassing government and military officials but also leaders of state-owned enterprises, university presidents, hospital chiefs, as well as those in the private sector.
“Since the 18th Communist Party of China National Congress, China has been relentless in its anti-graft efforts, and much has been achieved, including the arrest of several ‘tigers,’ such as Zhou Yongkang (the former head of security for the Chinese government and one of the country’s most powerful politicians),” he said.
Derek Scissors, an expert on the Chinese economy at the American Enterprise Institute, said the anti-corruption campaign has limited spending on luxury goods, an industry that makes up a small fraction of foreign investment.
China continues to improve the environment for foreign investment and lower the investment threshold, while encouraging foreign investment in sectors like high technology, environmental protection and services.
In 2015, China attracted 781.4 billion yuan (126.3 billion U.S. dollars) in non-financial foreign direct investment, up 6.4 percent from 2014.
The country continues to be the world’s top investment destination and that will likely continue in 2016 and 2017, according to a survey conducted by the United Nations Conference on Trade and Development.
China will also adopt a “negative list” to clearly indicate where foreign investment is permitted and grant overseas companies pre-establishment national treatment.
ANTI-CORRUPTION CAMPAIGN LETS MARKET PLAY DECISIVE ROLE
The crackdown on corruption helps ensure that the market plays a decisive role in allocating resources, which is conducive to a sustainable and sound economy, experts say.
Chen Fengying, research fellow at the China Institute of Contemporary International Relations, said that fighting corruption is an imperative way for China to establish market order. “From a market aspect, it will firstly create a normal investment order, reduce investment costs and establish transparency and fair competition.”
“Secondly, anti-corruption offers time-saving benefits for foreign investors, as they no longer need to cultivate relationships before starting a project,” she said, adding that “a market economy ruled by law will become enhanced.”
Koh echoed her opinion, saying “the elimination of graft means hidden costs are minimized, and eventually consumers benefit from it.” Koh says enterprises usually lob business costs — including “bribes to officials” — to consumers.
The Chinese government has long recognized that corruption has driven up the cost of starting a business and dampened innovation and continues to streamline administration and delegate powers to lower levels of government.
Chinese Premier Li Keqiang has said streamlining is necessary to eliminate the room for rent-seeking and the breeding ground for corruption.
“To most foreign investors, a market that is transparent and rule-based is far more effective and efficient to handle,” Koh said.
Ron Mock, president and CEO of the Ontario Teachers’ Pension Plan (OTPP), said China’s anti-corruption efforts in the financial sector mean the country is improving its investment environment in line with global expectations, which sends a positive signal to investors.
“China’s reform carries signals of sustained transition in market liberalization, which coincides with the OTPP’s investment strategy featuring long-term proceeds,” he said. “The fund will take China as a primary investing destination among Asian countries in the future.”
MORE TO DO
Corruption is a complex social, political and economic phenomenon that affects all countries. Government, the private sectors, non-governmental organizations, the media and citizens around the world have joined hands to fight it.
China, as a signee to the United Nations Convention against Corruption, has played an active role in international anti-corruption work within such frameworks as the Asia-Pacific Economic Cooperation (APEC) and G20, by providing a favorable policy and institutional environment.
During the APEC meeting in Beijing in 2014, the Beijing Declaration on Fighting Corruption was adopted, with an aim to eliminate corruption through extradition and judicial assistance and more flexible legal measures to recover the proceeds of crime.
It is expected that China would steer the G20 agenda toward anti-corruption work when it holds the group’s presidency in 2016. And China has been active in encouraging the Organization for Economic Cooperation and Development to play a bigger role in combatting corruption.
China’s top graft-buster Wang Qishan said China must strengthen law enforcement ties with the United States, Europe, Canada and Australia, where corrupt fugitive Chinese officials now call home.
Meanwhile, China will be more open to foreign investors and continue to reform its governance to provide more transparency and predictability.
Patrick Chovanec, managing director of Silvercrest Asset Management Group LLC in New York, said reforms to tackle corruption need to be implemented across government agencies and down to the provincial and local levels. Only then can China truly create an environment where investors can expect a higher degree of certainty. Enditem.
(Xinhua reporters Gao Pan in Washington and Ma Yujie in Singapore contributed to this story)