HONG KONG: Service sectors, including tourism and elderly care, in some of China's largest cities will be allowed to open to foreign investment, the State Council, the country's cabinet, announced on Saturday.
The announcement comes amid growing concern from foreign investors about the country's ongoing Covid restrictions, data security and the politicisation of economic matters, on top of long-standing concerns about market barriers and an uneven playing field.
The measures are part of a pilot project that will run until April 2024 and affect companies in Chongqing, Shanghai and Tianjin, as well as the island province of Hainan.
They form part of a wider plan announced in April 2021 to relax the rules on foreign investment for three years. It contained 203 pilot projects and covered 12 key service industries, including technological services, financial services, healthcare, education and e-commerce.
The State Council asked relevant departments to make adjustments and to establish a management system that helps to expand and open up the service industry.
The latest details of the plan indicate that market access will be relaxed for private entities funded by foreign donors running non-profit nursing homes for the elderly in Tianjin, Chongqing and Hainan.
Qualified foreign-invested travel agencies in Shanghai and Chongqing will also be allowed to offer overseas tours, excluding Taiwan.
The importance of the latest measures for China's domestic market and in showing the country's open stance should not be underestimated, according to Zhao Xijun, a Renmin University finance professor specialising in foreign trade and investment.
"In terms of scale, the population of the four areas is considerable, which is equivalent to the opening up of the tourism and elderly care market of up to 80 million people to foreign companies," he said.
"Besides, the move also follows the consistent practice of China's opening up, first piloting in a small number of cities and industries, gaining experience, then steadily promoting [the measures] to more areas."
Although China's foreign direct investment is still recording double-digit growth, overseas investors are becoming increasingly sceptical about the business environment.
According to data from the Ministry of Commerce, foreign direct investment between January and August grew by 16.4% or 892.74 billion yuan (US$125.4 billion).
The moves to relax restrictions on overseas tourism comes after Covid restrictions made it almost impossible for ordinary Chinese to leave the country.
In May, the Chinese National Immigration Administration imposed a de facto international travel ban, forbidding citizens from going overseas for "non-essential" reasons.
Even domestic tourism is shrinking due to internal travel restrictions imposed as part of the country's zero-Covid policy. Domestic tourism revenue during this year's week-long National Day holiday stood at 287.2 billion yuan - only 44% of the 2019 figure.
Previous relaxations on foreign investment include measures to support the establishment of wholly foreign-owned finance companies in Shanghai and Hainan.
Hainan and Chongqing have also been cleared to allow foreign banks to participate in import and export tax payment services and related business guarantees, while Hainan will also encourage overseas financial institutions to invest in and set up securities companies.
When the pilot scheme was announced last year, Zong Changqing, head of the commerce ministry's Department of Foreign Investment Administration, said Beijing had achieved positive results when it introduced similar measures in 2015.
He said that China's GDP per capita had passed US$10,000 and foreign investment in the service sector accounted for 70% of the total.
But on the other hand, he said the added value of the service industry accounted for about 55% of China's GDP - which was about 20% less than that of developed countries.
"There is a need to further expand the opening up of the service sector, … and to shape new advantages on the international stage," Zong added.