The Chinese Government's advocacy of the country's overseas investment, its attempt to introduce a floating interest rate system, as well as the respite of withdrawing beneficial tax treatment will certainly benefit Asian co-operation, Chinese ministers said yesterday at the Boao Forum for Asia in Hainan Province.
The first good news came when Li Rongrong, minister of the State Economic and Trade Commission, promised at the forum that, as China further adjusts its industrial structure, more market places would be available to foreign exporters in China and more Chinese manufacturers would be encouraged to shift their production overseas, especially to the neighboring East Asian region.
Following Li's speech, a group of Chinese ministers - including the vice-minister of the State Development Planning Commission, the governor of the central bank, the minister of the State Taxation Administration, and the minister of Information Industry - aired their views during a session entitled "China's Entry to the World Trade Organization (WTO) and the Regional Economic Development."
Facing challenges after the country's accession to the WTO in December, the State is massively restructuring its industries, while gradually lowering its tariff rate and abolishing most trade barriers.
"The structural adjustment, which will wash out thousands of loss-making factories, may bring market vacuum, which means great opportunities for our neighbors," said Li.
The opportunities are not limited to this restructuring, according to the minister. With growing manufacturing capabilities and the advancement of free trade within the region, China will encourage more domestic manufacturers to establish their production bases in countries belonging to the Association of Southeast Asian Nations (ASEAN).
Though still modest in absolute terms, Chinese investment is growing very quickly. In 2000, the Chinese Government approved US$108 million in new investment to ASEAN members - a 50 percent jump from 1999.
The total actual Chinese investment is certainly higher, as many Chinese invest through offshore entities because of worries about currency controls.
Their worries may be allayed, according to Dai Xianglong, governor of the People's Bank of China, the central bank.
"China will gradually loosen capital regulations and advance the free convertibility of renminbi stably," the governor promised at the forum.
Meanwhile, the government is also pushing the market-oriented determination of the interest rate of renminbi, and attempting to realize a floating currency exchange rate system.
Besides the above measures which will attempt to facilitate Chinese investment and consumption overseas, Dai also voiced his support of regional monetary cooperation.
"We will sign currency exchange deals with more countries," promised the governor.
Despite policies and measures to encourage Chinese investment overseas, ways to make foreign currency constantly flow into China - the world's second largest foreign investment destination - are still a major concern of the Chinese Government.
"Due to the worsening of world economies, we will seriously consider the planned abolishment of the beneficial tax rate enjoyed by foreign investors," said Jin Renqing, minister of the State Taxation Administration. "Though the favorable status foreign investors have enjoyed in China so far is not in accordance with the national treatment principle advocated by the WTO, it does not mean the beneficial tax rate should be halted immediately."
(China Daily April 13, 2002)
