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Approaching Major Support

US TSYS SUMMARY

Inflation Concerns Underpin Bear Steepening

--Says It Will Tighten IPR Protections
     BEIJING (MNI) - Chinese officials said Friday that the government is
planning to further reduce restrictions on foreign investment, including fewer
controls on foreign holdings in the banking, securities and insurance sectors.
     At a press briefing here, officials from the Ministry of Commerce, Ministry
of Finance, and the State Administration of Foreign Experts Affairs expressed
China's willingness to attract more foreign investment into the country as it
faces increasing competition from lower-cost countries. 
     Vice Commerce Minister Wang Shouwen said that as China enters a stage when
its economic growth has stabilized and its economic structure has been
optimized, it has transformed from attracting investment based on its low
production costs to relying more on its market size, infrastructure, human
resources and business environment to attract overseas investment. 
     The new measures will allow foreign investors to hold more than the 49%
stakes they are currently allowed in banking, securities and insurance
businesses, although Wang did not say how much the limit will be raised.  
     He also stressed that China will make greater efforts in protecting
intellectual property rights -- a move being made in the wake of the U.S.
government announcing last week that it was starting an investigation into
China's IPR practices under Section 301 of the U.S. Trade Act of 1974. The U.S.
has threatened to impose unilateral sanctions if it finds that China's trade
practices are unreasonable or discriminatory.
     "As a developing country, China's protection of intellectual property
rights could not be perfect, which we are well aware of," Wang said. "We will
continue to strengthen those protections."
     China will implement its negative list on foreign investment nationwide,
after the list had only applied to free-trade zones, and further open up 12
fields and industries to foreign investment, in line with regulations on the
matter announced by the government earlier this month, Wang said.
     China will lessen restrictions for foreign investment in the 12 specified
industries, with the government targeting investments in the new-energy vehicle,
vessel design, aircraft maintenance, and ocean freight sectors. 
     To improve the business environment, China will ensure the free flow of
foreign investors' profits, encourage them to participate in the optimization of
Chinese companies, and maintain the stability and continuity of its foreign
investment policies, Wang noted.
     "Restrictions on the proportion of shares held by foreign investors,
requirements on the identity of high-level managers, and limitations on the
scope of business areas still exist," Wang said at the briefing. "We will
further reduce them."
     Wang rebutted the argument that the business and investment fields
generating the highest profits are still dominated by Chinese state-owned
enterprises, saying that after the negative list is expanded nationwide, foreign
companies will be able to compete on an equal basis.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com
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