Xi Jinping feels the heat, vows to open China's economy like never before

It is expected to aggressively vie with India for investments abroad as India becomes a FDI hub

President Xi Jinping has vowed to open up China like never before as the world's second-largest economy faces dwindling foreign exchange reserves and rising competition from countries like India for foreign investment.

China has been trying several measures to keep the economy floating and struggling to keep the growth rate steady. It has moderated its economic growth forecast for 2017 to "around 6.5 per cent" from the 6.7-7 per cent it had targeted last year.

This year's target is below expectations and signals China is likely to embrace risk-control over short-term growth.

Last year, however, it achieved a full-year growth of 6.7 per cent. That figure was the weakest since the 1990s.

Xi, who has emerged as China's most powerful leader in recent years and who is nearing the end of his first term in office, told lawmakers yesterday that China's opening door will not close, vowing that the country will continue to open up on all fronts and continue to liberalise, state-run Xinhua news agency reported today.

His remarks - made during a panel discussion with lawmakers from Shanghai at the annual session of the National People's Congress (NPC) - assume significance as China has been loosening its grip on foreign capital inflows and reducing restrictive measures and opening more sectors.

Yesterday, Premier Li Keqiang delivering a government work report detailed "unprecedented" opening-up measures to the outside world under its flagship 'Made in China' initiative.

"Foreign firms will be treated the same as domestic firms when it comes to licences applications, standard setting, government procurement and will enjoy same preferential policies under Made in China 2025 initiative," Li said.

Foreign firms will be able to get listed on China's stock markets and issue bonds. They will be allowed to participate in national science and technology projects, he said.

Significant improvements will be made in the environment for foreign investment. Service industries, manufacturing and mining will be more open to foreign investment, he added.

Local governments in China can, within the scope of the powers granted them by law, adopt preferential policies to attract foreign investment.

With the renewed focus for FDI, China is expected to aggressively vie with India for investments abroad. Its forex reserves - the world's largest - dipped below $3 trillion, sparking concerns among the Chinese policymakers.

In the past few years, India has become a major destination for FDI under the 'Make In India' programme. According to a Financial Times report, "In 2015, India was for the first time the leading country ($63 billion) in the world for FDI, overtaking the US (which had $59.6 billion of greenfield FDI) and China ($56.6 billion).

Last year, China amended laws on foreign investment, and unveiled measures to simplify the approval procedure for foreign companies, the official news agency reported recently.

According to the report submitted by Li, China will build 11 high-standard pilot free-trade zones, and widely spread practices developed in these zones that are proven to work.

It said China will extend the practice of processing international trade through a single window, which enables cross-border traders to submit regulatory documents at a single location and thus improves efficiency.

After slowdown in the past few years, China tough has managed better FDI inflows. Last year it was $118 billion, which was a 4.1 per cent year-on-year increase compared to 2015, according Chinese Ministry of Commerce.

The ministry attributed the steady momentum to government action such as easing restrictions in free trade zones (FTZs) and simplified procedures for investment entry.

Ding Shuang, an economist with Standard Chartered, said, "Leaning against the anti-globalisation headwinds, the Chinese government recently emphasized the need to further open up the economy and attract foreign investment. We think concrete moves in this direction can help China move up the value chain.