Interview: Reshaping Foreign Investment(1)

The EO interviewed Zhang Yansheng, principal of International Economics Institute under Macroeconomics Academy of the NDRC, on November 8th. Zhang says that the new guidelines are in step with the government's "scientific outlook on development", which advocates innovation, energy conservation, and reduction of the trade surplus. Zhang was brought into the drafting process as an expert advisor.

The Economic Observer: The new Catalogue was supposed to be promulgated in the first half of the year. Why was it postponed until now?

Zhang: With economic and social conditions in China changing so rapidly, people in different areas and different industries hold widely divergent opinions on foreign investment policies, making it hard to reach a consensus. Some say that the Chinese economy has been rather well developed, and therefore it's time to adopt consistent industrial policies on domestic and foreign investment based on fairness and non-discrimination. But actually all of the adjustments, whether to those highly energy-consuming, seriously polluting and resources-related businesses or to those technologically undemanding, low-value-added processing businesses, have brought public responses far exceeding our expectation. Things are much more complicated than we have imagined. With this in mind, it's not bad news that the policy makers acted cautiously and postponed promulgating the Catalogue a little.

The EO: There are quite a few disagreements on China's policy regarding foreign investment. Can you break this down a little?

Zhang: In my own opinion, the most difficult question is whether to encourage or limit those low-tech foreign processing enterprises.

At the very beginning of China's reform and opening-up, which was the toughest time for attracting foreign investment, a batch of Hong Kong businessmen came to China and invested in the simplest and the least technology-demanding industries, such as box, bag, shoe, hat, clothing etc. factories. Before that, exports were concentrated in natural resources such as crude oil, timber, and coal. It's those Hong Kong businessmen who taught us how to organize a system of market production, which was of special significance to China.