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China should introduce an early warning-system to prevent multinational companies (MNCs) from cornering the Chinese market, a cabinet think-tank has suggested.
Xie Fuzhan, vice-president of the State Council Development Research Center urged the government to take action as foreign investors have intensified expansion in some industrial sectors and obtained sizeable shares of certain large projects.
"These are new trends in foreign investment, and they deserve close attention," Xie warned.
"But it doesn't conflict with our lasting strategy that emphasizes partnerships with MNCs which are willing to transfer core technologies and management experience."
Facing the new investment trend, Xie suggested that China should establish standards and a system to watch the behavior of overseas investors to prevent monopoly risks in the Chinese market.
The system and standards are expected to be line with the Anti-Monopoly Law, which is going to be delivered to the National People's Congress for voting soon.
Xie voiced his concerns at yesterday's forum on China's Investment Opportunity and Overseas Chinese Entrepreneurs, which was organized by China News Agency.
In addition to preventing foreign investors from implementing monopolistic practices, China is establishing an anti-monopoly law to create equal market access for all investors, said Lin Yueqin, researcher with Chinese Academy of Social Sciences.
"The upcoming law will stipulate very clearly that a dominant market position should not be allowed to be abused by any market players, either from home or abroad," said Lin.
Lin said China will limit mergers and acquisitions and create a report system in which any mergers or acquisitions that meet certain criteria will require approval.
The criteria will be transparent, meaning enterprises will be held fully responsible for their business activities, said Lin.
Instead of forging partnerships with local companies, foreign enterprises have accelerated their efforts to become single investors in China, Xie said.
In addition, their presence in the electronics, auto and chemical industries, as well as some large projects, has increased considerably this year, according to Xie.
In terms of foreign direct investment (FDI), China ranks second after the United States, which received US$96 billion in FDI in 2004, according to a United Nations report. During January-October period, FDI in China reached US$48.4 billion.
Out of the world's top 500 MNCs, more than 400 have invested in China. "The volume of investment has increased markedly," said Xie, adding that the foreign investment currently averages US$4.04 million per contract, up from US$3.51 million in 2004.
Xie said many foreign companies, which mainly operate factories and processing centers in China, are moving their research and development centers to China.
Statistics indicate that over 700 foreign research and development laboratories have been set up in China since Motorola established the first one in 1993.
The latest example is Ericsson, the world's largest maker of mobile phone networks, which said in September it would invest US$1 billion in manufacturing and research in China over the next five years.
(China Daily December 8, 2005)
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