Outbound investment reached a record $107.84 billion in 2013

Wang Xianlong didn't expect it would take only five working days to register his business, an outdoor products company based in Yiwu, a city in east China's Zhejiang Province. "Previously, getting administrative approval used to take at least three weeks," Wang said. "I would have to go back and forth between several government departments. But now, the Yiwu Administration Service Center offers a one-stop service for enterprises. It's much faster."

China is trying to streamline the procedure to get administrative approvals and delegate power to lower government levels. Wang's company is among the beneficiaries of this overhaul.

Since March 2013, 632 items that were previously subject to government approval have been either scrapped or delegated to lower government levels. This measure is part of the pledge Premier Li Keqiang made this year to reduce such items by one third. It is meant to streamline the administrative process for investors and business startups, create job opportunities and ensure innovations are fully used in the market. Another 200 administrative approval items would be abolished or delegated this year to unleash more market dynamics.

Increased opportunities

The latest Ministry of Commerce statistics show the process is underway. To date, the ministry has cut administrative approval items by 35.5 percent. Twenty more will be either removed or greatly simplified. The measures will facilitate Chinese companies' overseas investment as well as boost foreign capital inflow. 

Many of the canceled items were related to domestic trade as well as foreign trade, investment and foreign aid. For example, the approvals needed for foreign cooperation contracts in petroleum, natural gas and coal-bed gas projects were canceled in May 2013. "It allows enterprises more self-management, encouraging Chinese firms to invest overseas and increase external cooperation," said Ren Haoning, an energy industry researcher at China National Investment Consulting Co. Ltd.

With the government lowering the market entry threshold for businesses, it is also necessary to strengthen supervision, analysts say. Post-establishment supervision is being intensified to improve the management system with measures like revising regulations and issuing supervision reports and warnings.

"Strengthening post-establishment supervision is as important as streamlining government approvals," said Cai Lan, Dean of Tsinghua University's School of Public Administration. Once approval items are canceled, a supplementary restraint mechanism should be established to supervise and regulate market entities, he added.

The ministry's September figures indicate that outbound investment reached a record $107.84 billion in 2013, a nearly 40-fold increase from $2.7 billion in 2002. There are now about 25,000 Chinese enterprises operating outside China with 1 million employees. Overseas risk prevention, control and information sharing should be strengthened to support overseas investment due to uncertainties such as war, disease, political instability and natural disaster, according to Assistant Minister of Commerce Zhang Xiangchen.

Along with reducing administrative approval items, the ministry has assumed greater responsibility for protecting the interests of overseas enterprises. The Regulations on Overseas Investment was revised in October, reducing the number of foreign investment approval items from 6,608 to some 100. The move generated positive feedback.

Enhanced confidence

Simplified procedures reduce costs and increase efficiency. The measure saw a notable rise in the number of overseas companies willing to invest in China.

From January to September, newly established foreign investment ventures amounted to 17,247, up 5.5 percent year on year. However, China actually used $87.36 billion of overseas investment, down 1.4 percent year on year. In September alone, the number of newly registered foreign investment companies reached 2,047, surging 9.4 percent year on year.

Mopoint Auto Parts Trading (Shanghai) Co. is a wholly-owned subsidiary of Fiat Chrysler. Since it moved to the Shanghai Free Trade Zone (FTZ) from Singapore a year ago, the company has been enjoying great economic benefits from the FTZ's decentralization of approval items, a significant reduction in transportation cost, simplified declaration procedures, as well as a paperless office. Li Ying, the company's supply chain director, is looking forward to the fruits of the new measures, saying, making full use of the new policy would be key to the company's growth.

Tan Shumeng, General Manager of China Shipping (Brazil), is delighted. "Since the government streamlined administrative approvals and delegated power last year, I have clearly found improvement in the efficiency of the departments China Shipping interacts with, including finance, foreign trade, docks and warehouse. We have significantly benefited from improved efficiency in the approval and customs clearance procedures," Tan said.

Sun Wentie, President of USA China Business Association, said with many approval items canceled, "many of our member companies are willing to invest in China due to the huge potential of the Chinese market."

Hu Jiangbin, Senior Vice President of United States Pharmacopoeia China, is confident of his company's growth in China, thanks to the reforms. He said it used to take at least two weeks to transport a chemical sample bottle from overseas to the laboratory in Shanghai. "But now it takes five working days," he added. "It has cut delivery time and the cost of importing samples."

Since November 4, the government has been soliciting public opinion on the newly revised draft of the Catalogue for the Guidance of Foreign Investment. The new regulations would reduce the sectors in which foreign companies can invest only by forming joint ventures with domestic businesses or are limited to minority stakes. Such sectors would be more than halved from 79 to 35. The government has also proposed lifting restrictions on foreign investors in sectors such as e-commerce, rail freight and chemicals. This is the most comprehensive revision to the catalogue since it was formulated in 1995.

The draft includes hundreds of sectors and industries in which the government encourages foreign investment, such as modern agriculture, hi-tech, energy conservation, environmental protection, new energy and modern services, according to Wang Zhile, Director of Research Center of Multinationals, Chinese Academy of International Trade and Economic Cooperation, under the Ministry of Commerce.

Brazil-China Economic Trade Promotion Association Director Guo Jingliang has high expectations. "Besides vigorously streamlining administrative approvals and delegating power to lower levels, the country should commit to upholding the principles of open and transparent government by publishing all approvals in major foreign languages for foreign investors to secure a good and stable policy and law environment," Guo said.