Since China put forward the dual cycle, various policies and measures have been taken simultaneously to ensure that China will become a mainstay in the great changes in the future. For example, China's National Development and Reform Commission, the Ministry of Commerce, the Ministry of Industry and Information Technology, and other six ministries and commissions jointly issued Several Policies and Measures to Promote the Expansion of Foreign Investment with Emphasis on Manufacturing Industry, Stabilizing the Quantity of Foreign Investment, Improving the Quality of Foreign Investment, which emphasized further strengthening the efforts of foreign investment to promote and serve the manufacturing industry, and China's Fifth International Import Expo, as well as the enthusiasm of medical machinery!
In order to better understand today's topic, let's first find a reference system
1：American Dilemma
Since the outbreak of the epidemic, the economies of all countries have faced serious development difficulties. Many countries intend to ease the impact of the economic downturn by implementing loose monetary policies, and the United States is no exception. In view of the current situation of the United States, it is still facing serious inflationary pressure. In May, the CPI increased by 8.6% year-on-year, reaching the highest value in more than 40 years. In order to better promote economic recovery and development, the first measure taken by the United States is to issue dollars on a large scale. But it has not changed the reality of high inflation and low income in the country.
2：Why does this happen?!
We believe that a large amount of US dollars issued this time are basically exported or converted into public savings. The US government did not take such excellent measures as President Roosevelt's work for relief (work for relief makes money really flow to the local economy and solves the employment problem.) In fact, this wealth eventually flowed to the financial industry, especially stocks, which further exacerbated the foam in the financial market and the dilemma of price growth.
The second is the rupture of the American supply chain (which is very similar to the collapse of the Soviet Union. After the collapse of the Soviet Union, the internal small market formed in original Eastern Europe was completely disrupted). We believe that this is because multinational companies are keen to transfer to underdeveloped areas to reduce cost factors, rather than upgrading their own production processes and improving the technological capabilities of the American people, which leads to the dual situation of a high unemployment rate and the rupture of the supply chain in the United States, I believe this will cause many social problems in the future.
How to interpret the firm use of foreign capital in manufacturing?
1. First of all, we think we should solve the confusion in understanding, and foreign capital is the link of double circulation
In the face of external pressure, China should take the initiative to win foreign investment from the global value chain and not give way to international competition. With the increasing prominence of the main role of the domestic big cycle, the most important contribution of foreign investment to China's economy may be the new belt connecting domestic and international double cycles and the driving force for mutual promotion.
On the one hand, foreign capital brings foreign machinery and equipment, raw materials, advanced technology, etc. to China; on the other hand, after production and processing in China, some of them are sold in the Chinese market, but most of them are sold back to developed countries or other countries. In the domestic and international economic cycle, foreign capital is an intermediary, link, and power.
It is precisely because of the clear understanding that the new policy has given a lot of benefits to foreign investment, improved the business environment and financing conditions for foreign investment, and specially strengthened financial support for foreign-invested enterprises. For example, we will support qualified foreign-invested enterprises to facilitate foreign capital to use China's capital market for better development by listing on the main board, the science and technology innovation board, the growth enterprise board, and the Beijing Stock Exchange listing on the new third board foundation layer and innovation layer, and issuing corporate credit bonds for financing.
Excellent foreign-funded enterprises represent high-quality assets, and only our better guidance will not lead to the danger of indiscriminate use of foreign capital in the United States. Therefore, supporting foreign-funded enterprises to list on the A-share market will also improve the quality of A-share supply, and will also play a role in improving the A-share company structure and corporate governance. In addition, it also supports all kinds of financial institutions to innovate products and services under the premise of legal compliance and risk control and provide qualified foreign-invested enterprises with high-quality financial services and financing support in accordance with the principle of marketization. We also encourage all localities to share information on foreign-invested manufacturing enterprises and projects with policy banks, large banks, joint-stock banks, and other financial institutions in accordance with the law and regularly hold bank enterprise docking activities.
Strengthening financial support for foreign-funded enterprises will also enhance the role of foreign capital in China's industrial chain. According to expert analysis, many enterprises now have a common role between upstream and downstream. The downstream provides business scenarios for upstream innovation, while the upstream provides downstream enterprises with specialized, innovative, invisible champions and other enterprises, and the upstream and downstream nurture each other. We have an example of the photovoltaic industry. Foreign investment in China's photovoltaic industry chain can connect them through the capital market. For example, after mutual participation between upstream and downstream, it becomes a relatively close industrial chain. This will greatly improve the level, quality, and stability of China's economic development.
In the future, we should further clarify that foreign investment is an indispensable part of China's new double-cycle development pattern, further improve the expectations and confidence of foreign-funded enterprises in China's development, and firmly support the development of foreign-funded enterprises in China. Experts said that improving expectations and information is the most important aspect of stabilizing foreign investment.
2. Open up the pace and focus on supporting the manufacturing industry to utilize foreign capital
There are three highlights in Several Policies and Measures. First, put forward the in-depth implementation of the negative list of foreign investment access, do a good job in implementing the 2021 version of the negative list of foreign investment access, and implement the national treatment after foreign investment access with high standards; Second, strengthen the guarantee of land elements, give policy support to project land use, environmental assessment, planning, energy consumption, etc., and solve the main obstacles to attracting foreign capital in the past; Third, focus on the manufacturing industry to help China's real economy develop and build a manufacturing power.
In the past, some projects could not land, mainly because there was no land guarantee. This is a prominent problem in the eastern coastal areas. Several Policies and Measures require that all localities should promote projects to follow the planning and land elements to follow the projects, further clarify key industries and fields of the manufacturing industry in combination with local conditions, guide land elements to allocate to projects with rapid construction, good development, and high unit output, and ensure reasonable demand for foreign-funded projects in the manufacturing industry.
In terms of investment direction, the policy will greatly benefit manufacturing, the modern service industry, energy conservation and environmental protection, and other industries. In addition, in terms of regional layout, key support will be given to the central and western regions and northeast regions in the fields of basic manufacturing, applicable technology, and people's livelihood consumption.
According to Several Policies and Measures, in terms of advanced manufacturing and high-tech, foreign investors are encouraged to invest in high-end equipment, basic components, key components, and other fields. In terms of the modern service industry, foreign investment in R&D design, modern logistics, and other fields will be encouraged. In terms of energy conservation and environmental protection, we will focus on encouraging foreign investment in new energy, green and low-carbon key technology innovation, and demonstration applications.
Why does manufacturing become a key area to attract foreign investment? The most important thing is to develop the real economy and prevent the economy from breaking away from reality to emptiness. At the same time, the role of foreign investment in the double cycle is mainly realized by the manufacturing industry chain.
3. Encouraging profit reinvestment of foreign-funded enterprises is a top priority
The Several Policies and Measures encourage reinvestment of profits of foreign-invested enterprises, and require the implementation of policies such as the temporary exemption of withholding income tax for direct investment by foreign investors with distributed profits; Encourage the local government to provide the same supporting policies as the newly added foreign capital for the profit reinvestment of foreign-invested enterprises; Foreign-invested enterprises are encouraged to reinvest in the manufacturing industry in China to reduce their investment and operating costs.
At present, the scale of after-tax profits of foreign capital in China is very large. If we want to invest, its scale may be more than the newly absorbed foreign capital every year. The incremental effect of making good use of this foreign capital and absorbing foreign capital is the same. Therefore, encouraging foreign enterprises to reinvest their profits, especially to continue to invest in China's manufacturing industry, will improve China's industrial chain and resist the return of international manufacturing.
According to relevant research, in recent years, the proportion of profit reinvestment in foreign enterprise investment has been rising. Taking Jiangsu Province as an example, from 2018 to 2020, the profit reinvestment of foreign enterprises in Jiangsu Province increased from 1.27 billion dollars to 3.33 billion dollars, from 5% to 11% of the actually used foreign capital; The actually received profit reinvestment of foreign enterprises was nearly 30 billion yuan, accounting for 27.7%.
How does it accelerate its growth? We suggest that we should make great efforts to dig the rich mine of foreign enterprises' profits, focus on the implementation of fiscal and tax policies such as deferred tax payment, play a good combination of policies and services to promote reinvestment of retained profits and promote the transformation of trillions of profits into an investment, which can promote China's open economy to a new level.
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