BEIJING (Reuters) - China hopes to suspend its laws governing foreign investment in proposed free trade zones, the cabinet said, in a sign the world’s second-biggest economy could open further to foreign competition.
The State Council, China’s cabinet, will ask senior members of the National People’s Congress, or parliament, for the power to suspend laws and regulations governing both foreign-owned companies and joint ventures between Chinese and foreign companies in free trade zones, including Shanghai, the cabinet said on its website.
The move is aimed at “accelerating transformation of the government’s role ... and innovating ways of (further) opening up (to foreign investment),” according to the statement, seen on Sunday. It set no timetable, and gave no further details.
Foreign direct investment in China slowed in 2012 but reversed its decline in the first quarter of this year as confidence improved.
China attracted $38.3 billion in foreign direct investment in the first four months of 2013, up 1.2 percent from the same period in 2012.
China’s financial center, Shanghai, will test yuan convertibility and cross-border capital flows in the free trade zone pilot program.
The country’s new leaders have signaled they want to speed the process of making the yuan fully convertible over the next few years, as part of efforts to boost the currency’s use in trade and support wider financial reforms.
Shanghai officials are keen to experiment with freeing up the capital account and yuan convertibility, fearing the city could be left behind as rival centers, such as Hong Kong and Taiwan, move to develop cross-border yuan financial services.
Shanghai stepped up lobbying efforts after the 2012 creation of a special trade zone in Qianhai, near the southern boomtown of Shenzhen and across from Hong Kong, where yuan convertibility is being trialed.
The Qianhai zone, administered by the central bank, the People’s Bank of China, lets banks from Hong Kong offer cross-border yuan-denominated loans to mainland firms.
Other initiatives announced in 2013 include trial programs to smooth the way for foreign firms to move funds in and out of China, cutting the need for approvals and easing bank procedure.
Reporting by Shen Yan and Benjamin Kang Lim; Editing by Koh Gui Qing