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15 Aug, 2012

China’s Private Firms Plan Overseas Investments, the “Going Out” Strategy

People's Daily Overseas Edition, Author: Tian Li

August 15, 2012 – Recently, the National Development and Reform Commission (NDRC), together with 12 government departments under the State Council including the Ministry of Foreign Affairs, Ministry of Industry and Information Technology, jointly issued “The Implementing Opinions on Encouraging and Guiding Private Enterprises to Actively Develop Overseas Investment (The Opinions),” the first comprehensive policy document encouraging private enterprises to develop overseas investments.

The “Opinions” came up with 18 major measures with focus being placed on five aspects including the strengthening of macro-guidance and the perfection of policy support.

“Active participation” beginning to trend

According to the statistics published by the NDRC, national foreign direct investments totaled 382.3 billion U.S. dollars by the end of 2011, and a total of 65.1 billion U.S. dollars were invested in 132 countries and regions around the world in the same year, ranking first among developing countries. The total amount of foreign direct investments from 2005 to 2010 reached 228.92 billon U.S. dollars, an annual increase of 34.3 percent.

Like the introduction of foreign investment, investing abroad has become a keynote in China’s Reform and Opening-up Strategy.

After 30 years of reform and opening-up, it is time for China to speed up its “going out” strategy.

Zhang Yansheng, secretary-general of the Academic Committee of the NDRC, said that China participated in the globalization process passively at the beginning of its reform and opening-up, and after 30 years’ development, China has started to take initial actions to promote its global investment, production, marketing and services.

Importance of private enterprises increases

As China’s “going out” strategy develops, private enterprises are becoming increasingly important.

According to statistics, among the total overseas investment flow of China’s enterprises, the proportion of non-state-owned enterprises (mainly private enterprises) continues to increase and reached 44 percent in 2011.

According to Liu Lifeng, a researcher at the Investment Research Institution under the NDRC, China is now simplifying its approval processes for enterprises to conduct overseas investment and the overall atmosphere is relatively loose.

This policy issued by the NDRC can be regarded as a more specific supporting measure with more focus on private enterprises, Liu said.

Overseas investment still needs assistance

China’s enterprises are also facing several prominent problems and difficulties in overseas investment. For example, the intermediary service system of overseas investment is immature, and domestic enterprises are small scale and relatively weak leading to a lack of international professionals and long-term planning, disorderly competition and at times, even vicious competition.

According to Zhang Yansheng, China’s enterprises are still in the primary stage of the “going out” strategy.

Most of the “going out” enterprises are engaged in the energy-intensive and labor-intensive fields, which cannot fit into the local condition resulting in a great risk of “being drowned.” Thus, support from the government is still greatly needed, Zhang said.

Kong Linglong, director of the Department of Foreign Capital and Overseas Investment under the NDRC, emphasized that overseas investment of private enterprises should be promoted in accordance with the principle that “an enterprise is oriented while the government offers guidance, so that cooperation is jointly carried out and development will be active and sound.”

Read the Chinese version at: 民企主动参与世界分工,