The period covered by China’s 13th Five Year Plan (2016 – 2020) should see a deepening of the reformist trend, initiated since the XVIIIth Central Committee of the Communist Party of China was appointed in 2012. The first three years in office have shown that the reformist will of the country’s new leadership was real, and went beyond words. Administrative authorisation requirements have been removed and new sectors have been opened to private, including foreign funds. Confirmation of that path will create new opportunities for foreign investors in China.
Nevertheless, these foreign investors should keep in mind that bigger opportunities in China will come at the cost of bigger risk-taking. A common misreading about recent reforms in the country has been that they aimed at weakening the giant State-Owned Enterprises (SOEs) that structure China’s economy. The truth is that they aim at strengthening them, and positioning them on the global competitive scene. And one of the ways to attain that result is to transfer risk-taking in non strategic activities to private investment. Systematic bailout for unprofitable investment, which is the unwritten rule for SOEs that will concentrate on their strategic core businesses, will not apply to private investors in downstream activities.
The regional factor
Another important factor to consider for foreign investors in China would be the discrepancy that can appear in China between national goals and local realities. For governments managing the balances of regions that are often the size of countries in the rest of the world, the right choice of a partner for a development project may be different from that viewed from Beijing. And those local authorities will play a decisive role in the success or failure of many ventures. Many new opportunities will undoubdtedly appear in China in the coming years; but reading them carefully is of the utmost importance for outsiders.
Top image via TTstudio