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Economy

Shandong: 22 measures adopted to attract FDI

January 24, 2018


Abstract : Shandong has given a high attention to attracting foreign capital and implemented all measures for reforming the foreign investment approval procedures, made a down-to-earth effort to optimize the investment environment for foreign investors.

After the global financial crisis, the international direct investment lacked the strength to recover and the situation has triggered fierce competition among all countries and regions in attracting foreign capital. It was against this background that Shandong Province has begun to give a high attention to attracting foreign capital and implemented all measures for reforming the foreign investment examination and approval procedures and management system, made a down-to-earth effort to optimize the investment environment and conditions for foreign investors. As a result, the amount of foreign capital used has increased steadily and the quality of foreign investment used has been improving constantly.

According to the Department of Commerce of Shandong Province, from 2013 to 2016, Shandong had cumulatively established 5,743 foreign-funded enterprises and the amount of contracted foreign capital reached 74.86 billion U.S. dollars and the amount of foreign investment used reached 62.38 billion U.S. dollars, with an average annual increase of 6.1 percent and 6.2 percent, respectively. In the first three quarters of 2017, the amount of foreign investment kept growing. The province newly established 1,097 foreign-funded enterprises, 1.3 percent less than in the same time of the previous year and the amount of contracted foreign capital reached 122.16 billion yuan, increasing by 38.8 percent and the amount of foreign capital used reached 87.93 billion yuan, increasing by 5.8 percent.

In terms of investment structure, the amount of foreign investment in the manufacturing accounted for more than a half and that in the high-tech service industry kept growing. The amount of foreign investment actually used by the manufacturing industry was 48.04 billion yuan, rising by 12.4 percent and accounting for 54.6 percent of the total foreign capital used in the province. The amount of foreign capital used by the service industry reached 32.45 billion yuan, dropping by 8.7 percent. But the amount of foreign investment actually used by the high-tech service industry increased by 11.3 percent, accounting for 23.5 percent in the whole service industry, rising by 4 percentage points over the same period of the previous year.

Hong Kong remained the No.1 source of external capital, with the amount of investment of 41.93 billion yuan, rising by 3.3 percent. The investment from Europe, North America and Japan showed growing momentum. The amount of investment from EU countries was 8.23 billion yuan, increased by 11.7 percent; that from the United State was 4.34 billion yuan, increased by 1.6 percent; that from Japan was 3.23 billion yuan, increased by 35.7 percent.

The amount of capital by investing companies doubled and redoubled. The year-on-year growth under the capital account was the new figures of foreign investment in the first three quarters of 2017. During the period, investing companies invested in 48 new companies, with the amount of contracted foreign investment reaching 13.83 billion yuan and the amount of investment used was 7.37 billion yuan, increasing by 1.5 times, 3.6 times and 1 time, respectively. In terms of investment mode, the amount of foreign capital used under the capital account reached 61.78 billion yuan, rising by 4.6 percent.

A study has found that there are hidden worries behind the steady rise in the use of foreign capital in Shandong. After the global financial crisis, the international direct investment lacked the strengthen of recovering, triggering fiercer competition among all countries and regions and the participation in the competition by low-income countries has brought about the “diversion” effect. This has brought pressure to Shandong in attracting foreign investment. In the first quarter of 2017, 80 development zones of the provincial level and above used none foreign investment.

Besides, the province has not enough foreign investment project reserves. Since 2016, the number of new enterprises established in Shandong has been dropping. The number of new enterprises established in 2016 dropped by 2.1 percent. In the first eight months of 2017, 975 new enterprises were established, 0.2 percent less than in the same period of the previous year. Among them, the number of projects in seven cities dropped, eight cities had a monthly newly established project less than 2. Apart from Qingdao, Yantai and Weihai, all the other cities had a monthly newly established project less than 10.

In order to raise the level of opening up so as to use more foreign capital, the province published a document named Notice of the People's Government of Shandong Province on the Active Utilization of Foreign Capital in the New Period, outlining 22 measures, including new round of high-level opening up to the outside world, improvement of the system for supporting the use of foreign capital, implementation of a comprehensive foreign investment promotion strategy and creation of  top-class environment for doing business in the province.

According to the notice, the province will implement a management mode of negative list, foreign-funded enterprises can access to the industries, areas and business not listing on the negative list and special administrative measures on foreign investment, thus expanding the areas for attracting foreign investment.

The province will support foreign to get involved in innovation-driven development strategy, in building R&D centers and corporate technology centers, apply for post-doctoral work stations and participate in state and provincial planned science and technology projects. Foreign investment is also encouraged to participate in the program of making the province strong by developing the manufacturing industry. This round of foreign capital utilization will be combined closely with the development of a new type economy, such as the new generation of information technology, biology, high-end manufacturing, new materials, modern oceanography, green and low-carbon development, digital creations and other strategic and emerging industries and such advanced manufacturing as smart manufacturing and green manufacturing.

Financing and leasing, commercial insurance and tallying, e-commerce, industrial designing, engineering consulting, modern logistics, inspection and detection and other production services, medical and old-age care, education and training, culture and entertainment, tourism and leisure and other livelihood services are all open to foreign capital. The foreign capital will be further expanded in such areas as infrastructure and public services.

The notice gives a special stress to the equal application of the preferential policies to both domestic and foreign-funded enterprises. For instance, a foreign-funded enterprise may enjoy the equal preferences such as R&D expenses to be calculated into reductions, high and new technology enterprises and R&D centers. Those qualified may apply for science and technology award at the state and provincial levels. They enjoy as domestic enterprises the related supporting policies contained in the Shandong provincial Program of Action for China Made 2025. Those investing in the real economy enjoy the preferences outlined in the document named Opinions on Further Reducing Cost of Real Economic Enterprises.

The financing channels and land issues of foreign enterprises will be further unblocked. The province encourages foreign-funded enterprises to get financing by multiple means such as issuing enterprise bonds, corporate bonds, convertible bonds and using non-financial enterprise debt as financing tools. Those that have the conditions may get overseas currency funds through borrowing and issuing bonds. Those that are listed on the stock market will enjoy the supporting policies same as domestic enterprises. In order to ensure the land used by quality and highly efficient foreign-funded enterprises, the province has decided to follow the floor price for land lease that is 70 percent of the lowest standards for the land for industrial use. In areas where new industries have developed fast and the demand for land is big, priority will be given to new industries.

The investment promotion and competent personnel import will go hand in hand. For outstanding personnel engaging in innovations, Shandong will subsidize the project by 50 million yuan at maximum. Enterprises that will be able to create the world first class technology and can help the transition and upgrading of industries, the province will provide a maximum of 60 million yuan equity as a support to such enterprises.

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Keyword: Shandong

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