Key Takeaways
- In February 2025, China’s Ministry of Commerce issued a new Action Plan for Stabilizing Foreign Investment.
- The Action Plan forms part of a longer- term process of gradually opening up more sectors to foreign investment, and piloting reforms to partially liberalise previously closed areas (in the service sector, telecoms, education and healthcare).
- China’s leaders are particularly keen to emphasise the “voluntary and unilateral” nature of these liberalising reforms, and to contrast them to protectionist moves in advanced Western economies.
- The 2025 Action Plan is an example of the performative element of administrative change and political action in China. It is best thought of as an attempt to send a message to outsiders to convince them of the leadership’s intent to further open the economy, to make it easier to invest, and to guarantee the rights of both current and future foreign investors.
- There is a relatively strong belief (or perhaps hope) in China that the Trump presidency will result in Europeans seeking to reset Sino-European relations.
- Despite the messaging, it remains far from clear when or if new sectors will become truly open to foreign investment, and if guarantees and assurances will always be honoured.
- Many of the questions Europeans have long had about reciprocity and the openness of the Chinese economy essentially remain unanswered.
Introduction
Despite the
title, this is not a paper about actual investment in China. There are no
statistics at all in what follows. To be sure, there is a discussion of some of
the specific changes to the Chinese inward investment regime that have a very
real impact on who can do what in which economic sectors in China. But the main
concern is how these changes feed into a wider process of signalling and
messaging; how China’s leaders are trying to establish and disseminate an idea
of an open Chinese economy that, in contrast to other key economies, is getting
ever more open.
In many
respects, this messaging is nothing new. For many years, annual government work
reports and major party speeches have repeated China’s leaders’ commitment to
further reform, opening up and liberalisation. It has become something of a
dogma that has to be repeated irrespective of what is happening in the real
economy. These major and mega events are effectively a grand exercise in
political marketing and selling the Party’s preferred idea of what it is, what
it stands for, what it wants, and what it will do to get what it wants.
In recent
years, though, there has been an extra effort to promote and project the idea
of China’s openness and greater future liberalisation through a range of
different mechanisms. These include continuing to use the above-mentioned big
showpiece acts of political theatre that are a feature of Chinese political
life. For example, Xi’s speech at the 2022 Party Congress contained a section
titled “Promoting High Quality Opening Up” which, among other things,
emphasised steadily expanding “institutional opening up with regard to rules,
regulations, management, and standards”; the need to expand the geographic
penetration of foreign capital and “more widely open the central, western, and
northeastern regions”; the importance of opening more sectors to foreign
investment; and the need to “protect the rights and interests of foreign
investors in accordance with the law, and foster a world-class business
environment that is market-oriented, law-based, and internationalized”.[1]
China has
also introduced new laws, revised regulations, and in 2025, introduced a new
special Action Plan to try and build confidence in China’s present and future
investment climate and regime. While some of these do contain detailed,
specific and important policy changes, through the way that they are announced
and reported, they are also individually and collectively designed to play a
performative role.
This
messaging is not just directed towards Europe. Indeed, parts of the message –
the idea of China as following a very different path from the major western
economies – seems to be primarily for audiences in the Global South. That said,
there are potentially significant consequences of China’s direction of travel
(as announced by China) for Europe. On one level, if China does indeed move
forward with opening new sectors to investment as it is promising to do, then
this will contribute to making the more level playing field that European
companies and countries as well as the EU have been asking China to create for
some years.[2]
On another
level, as China’s relations with the US seem destined to remain at best uneasy
and at worst conflictual for the foreseeable future, there is a hope in China
that dealing with Europe might be a different story; that despite the
differences between the two sides, at least some of the current economic
problems might be fixable. This was the feeling even before Donald Trump’s
re-election in 2024. It’s fair to say, however, that a Trump presidency is seen
as having the potential to create common ground between China and Europe as
both seek to navigate new global economic uncertainties that have their origins
in the White House.
Saying,
though, is not the same thing as doing, and despite some important changes, much of the
levelling of the playing field is still at a very early and limited stage or
remains a future aspiration. And trust is much
easier to lose than to build. Given what has happened in the past (such as the
party’s attempts to discipline private sector actors in 2020) and the ongoing
emphasis on ensuring China’s national security, then there might not be a great
deal of confidence that foreign investors will have the promised future freedom
to operate in China in the ways that they want to do. Indeed, if it hadn’t been
for past Chinese actions undermining trust and confidence and reducing
expectations, then it wouldn’t now need to do what it is doing to try to
restore that very same certainty and optimism. Rather than focus on how the
message is received, though, the main focus of the rest of this paper is on
what that message is, how it is disseminated, and what actual changes have been
made to the inward investment regime.
A New(ish) Message
The current
attempt to present China as not just open to foreign investment, but more open
now than ever before, arguably originated with the preparations to introduce a
new Foreign Investment Law.
[3]The Law, which was approved in March 2019 and came into
effect on 1st January 2020, was presented as the start of a new era
of simplicity, replacing the three previous laws governing investment with a
single shared legal framework.[4] It also claimed to guarantee foreign
investors the right to equal treatment alongside Chinese companies, including
in bidding for government procurement contracts, and providing enhanced
protection for commercial and intellectual property rights. Foreign companies
were also given new financial rights, including the ability to raise capital “by publicly issuing stocks, corporate bonds, and
other securities” and also to transfer any money made in China out of the
country in any currency.
Despite identifying itself as marking a
key step forward in “the policy of
liberalizing and facilitating investment”, as an Ernst and Young
analysis noted at the time, the law was actually rather “vague” and short on
specifics. Nevertheless, as the report also noted, it served an important task
of depicting China as moving towards ever increased openness in contrast to
what was widely conceived at the time as a move in the other direction towards
“more restrictive practices” in the US and the EU;[5]
hence the idea of policy documents playing a performative role. Note that here,
the direction of travel is depicted as the key rather than actual comparative
levels of openness at any specific time. As noted elsewhere “power
transitions are not just about what rising powers do or want. What existing
powers do (or don’t do) is important too” when it comes to shifting perceptions of
China’s relative global standing and reputation (not least within the Global
South).[6]
Of course, it was not just China that had to either rethink economic
priorities and strategies in 2020 as the pandemic resulted in lockdowns and
disrupted economic flows across the world. But not every other country was also
facing the same “complex
international environment, geopolitical tensions and some countries' attempt to
oust China from the global supply chain” that Vice Premier He Lifeng said China
was facing as it came out of the pandemic. This, He argued, made it “especially
necessary” for China to be proactive in showcasing investment opportunities to global
audiences as it tried to return to some sort of post-pandemic academic
normalcy.[7]
He made these comments at the official launch of 2023 as China’s “Year
of Investment”. Even though there were around 20 official Year of Investment
events both in China and overseas, this was a project that seemed to pretty
much pass under the radar of most foreign observers (and indeed apparently and
anecdotally of many in China as well). So arguably more important in terms of
establishing the idea of China’s increasing openness and reliability - as well
as making specific concrete changes - was the announcement of a new “negative
list” the following year.
Cataloguing
and Listing
For many years, China controlled who could invest how much in which
sectors through The Catalogue Guiding Foreign Investment in Industry. The
Catalogue, as it was generally known, was first published in 1995 and consisted
of detailed breakdown of those sectors where investment was prohibited,
restricted, permitted, or encouraged. Whilst some specifics were provided on
the nature of the restrictions in The Catalogue, the full and detailed
restrictions for each industry were found in the various and specific laws and
regulations for that industry. And even in permitted sectors, the devil was
often in the detail with limitations on what could be done often blurring the
distinction between restricted and permitted sectors.
The Catalogue was first amended in 1997, and then more fundamentally
altered in 2002 and 2005 in the wake of China’s WTO entry. These later changes
were meant to ensure compliance with the conditions of China’s WTO entry. But
as more industries and sectors moved from less to more open categories, these
moves were often qualified by the addition of new conditions that limited the
extent of new openness. In this respect, the performative impact of these two
post-WTO changes was not so much to reinforce China’s credentials
as an ever more open economy, as to question real long term
objectives and intent.[8]
After various subsequent amendments, The Catalogue was replaced by a simple
Negative List of restricted and prohibited sectors in 2018. Well, sort of.
There are actually two negative lists, one for the country as a whole, and a
special second and shorter list for Free Trade Zones (which are more open than
the rest of the country). There is also a separate “Catalogue of Encouraged
Industries for Foreign Investment”. Originally, there was also a further
Catalogue with special encouragements for investments in China’s Central and
Western regions (as most foreign investment goes to China’s coastal provinces),
but this was rolled into a single encouraged industries catalogue in 2019.[9] So while the listing process may have
been simplified, and China was keen to focus on the importance of the
transition to a simple Negative List in and after 2018, things are not quite as
simple as they the appear at first sight. The shadow of the old differential Catalogue
system hasn’t simply or entirely faded away.
Making and - arguably more important - announcing changes to the
negative list provides the opportunity to showcase China’s moves towards
increasing openness. So, for example, the first Negative List in 2018 reduced
the 11 prohibited manufacturing sectors in the final version of The Catalogue in
2017 to eight. The number of prohibited manufacturing sectors was incrementally
reduced in the 2019 and 2021 versions, with the final two removed in 2024,
leaving the list of prohibited manufacturing industries totally empty.[10]
The actual and overall difference that moving from two to no prohibited
manufacturing industries makes is questionable. But it was certainly a big
symbolic move. And just in case people missed it, official China was keen to
emphasise the importance of this move and its symbolism. The China Daily, for
example, argued that the new and:
shortened negative list
indicates China's firm determination to fulfill its commitment to
further expand high-standard opening-up, and will contribute to a more
favorable business environment and consolidate the confidence of foreign
investors [emphasis added]
Note here that increased investor confidence is being asserted by the
China Daily as a future inevitability rather than evidenced by investors
themselves. It also cited the Director of the China Institute of New Economy
calling the new list:
a clear signal that it is
dedicated to further opening up its economy to the outside world and creating a
world-class and market-oriented business environment governed by a sound legal
framework[11]
In a similar vein The Global Times finished the year by lauding the
“Landmark Policies” of 2024 that showed China “voluntarily and unilaterally”
opening its economy to the rest of the world, and becoming especially open to
developing economies.[12] It didn’t specifically mention that
other countries were not doing the same thing, but the contrast was there by
implication.
The Global Times report also pointed to further opening and
liberalisation to come, calling it a “key task” for 2025. Indeed, the
importance of this task was flagged by Xi Jinping at the Central Economic Work
Conference in December 2024, with a specific reference to “steadily” opening up
the service sector to foreign investment and also developing pilot programmes
in telecoms, education and healthcare. The “voluntary and unliteral” nature of
these reforms was also noted at the Conference;[13] a message that China’s leaders seem
very keen to promote and one which has specific significance for EU-China
relations (more on which later).
The
Action Plan
Which brings us to February 2025 and the announcement of the Action Plan
to Stabilise Foreign Investment. Much of the Action Plan is about improving the
existing Investment structure and environment; enhancing the effectiveness of
existing laws and processes, strengthening support for investors, simplifying
and clarifying procedures and making it easier to do certain things (such as
mergers and acquisitions with and of Chinese companies). There is also a focus
on finding new ways of encouraging investors to come to China, including changing
the legal system to facilitate and encourage foreign equity investment in Chinese
listed companies.
The main headline and significance of
the plan (in performative ways at least) was that having gradually opened up the
manufacturing sector in entirety, the Action Plan was a signal of intent to now
do the same in remaining closed or restricted sectors. In the first instance,
this entails experiments in “pilot areas” for the opening up of the telecoms,
medical care (including wholly foreign owned hospitals) and biotechnology, with
the Beijing Demonstration Zone “playing a leading role in expanding the opening
up of service industries”. Further down the line a plan will be developed for the “orderly expansion
of autonomous opening-up in the fields of education and culture”.
Decoding the Message
The Action Plan, then, does not fundamentally change very much at all in
specific details (with the possible exception of equity investment). But it does
– or at least, is intended to do - four important things. Here, while the
specific messages of the Action Plan are important in themselves, it is
probably best to think about how they form part of a greater effort designed to
get the same four messages across. The first is to reassure investors and give
them confidence that China is a safe and profitable destination by pointing to
the continual refinement of the investment climate and legal structure to make
it easier for them to do what they want to do in China without fear of
discrimination and government interference; or maybe more correctly, that
should be not too much or undue government interference.
Here, what is being said to an international audience sits alongside a
domestic facing campaign to give the same message to China’s private sector. In
2023, the State Council issued guidelines with 31 measures to boost the private
sector, and a new private sector protection bureau was established as part of
the National Development and Reform Commission.[14] The draft of a new law “On promoting
Private Economy” was introduced in December 2024,[15] and Xi’s speech on “unswervingly consolidating
and developing the public sector and unswervingly encouraging, supporting and
guiding the development of the non-public sector” was published in the party’s
theoretical journal the following March. More important than the actual article
itself was the fact that its publication was widely and loudly trailed in the
state media, which is always a sign that the leadership considers it to have
particular weight.[16] One by one the efforts of provincial
governments to support and promote the private sector have been reported by the
same state media.[17]
Second, China is not only open to foreign investment, but more open than
ever before, and the trend is to open even further in the future. Moreover,
this direction of travel will continue, so the message goes, despite economic
and geopolitical tensions with the West (and particularly the US) that are
often explained in China as an attempt to isolate it and prevent its further
development.[18] Following on from this, the third is to
present China as the polar opposite of large Western economies. As Europe and
the US move towards ever more protected economies, the message is that China is
going the other way towards ever greater openness and freedoms for outsiders.
This is a signal that seems to be primarily intended for audiences in the Global
South. For example, at the Forum in China Africa Cooperation summit in
September 2024, Xi did not just emphasis China’s focus on “open and win-win”
economic relationships in general (as he always does) but also announced a
special openness to the poorest economies in the Global South:
China will voluntarily and
unilaterally open its market wider. We have decided to give all LDCs having
diplomatic relations with China, including 33 countries in Africa, zero-tariff
treatment for 100 percent tariff lines. This has made China the first major
developing country and the first major economy to take such a step.[19]
Fourth, China is not doing this because it is being forced to do it, or as
part of bilateral or multilateral negotiations and obligations. Rather, in
words that have already appeared more than once in this paper, it is doing it
“voluntarily and unilaterally”. Or as Xi put it at the APEC Economic Leaders
Meeting in November 2024 (covering the last three of these four objectives in
two sentences):
Opening up is a distinct
hallmark of Chinese modernization. China always promotes reform through opening
up. We voluntarily subscribe to high-standard international economic and trade
rules, adopt proactive measures for further opening up, and take systematic
steps to further open the telecom, Internet, education, culture, medical
service and other sectors.[20]
Implications for Europe
The second
and fourth of these objectives have specific relevance for Europe. The new
areas slated for gradual opening include sectors where Europeans have long been
keen to gain access to. Even though these sectors are still a long way from
being open to Europeans, there is a hope in China that these moves will assuage
some European concerns about the lack of reciprocity in investment access. That
China is voluntarily and unilaterally making changes is also intended to help
convince Europeans of China’s long-term direction of travel and its
trustworthiness.
Ideally,
for the Chinese, these changes might convince the EU to re-open negotiations
over the Comprehensive Agreement on Investment
that were at the very least put on ice in 2021 due to political (rather than
economic) conflicts over Xinjiang. Or if revisiting the agreement itself is not
on the cards, then at least Europe might rethink some of its own restrictions
on Chinese investment and trade; particularly, but not only, in the EV sector.
But at the very least, the hope is that all that China has done since
2020 (and since 2023 in particular) shows, in the words of the Chinese
Ambassador to the EU, that “China’s new economic development
offers fresh opportunities for China-EU cooperation”.[21]
The potential for this cooperation
is contrasted with the potential for further discord and perhaps more in the
EU-US relationship. The idea that shared problems with Trump’s America will
push Europe closer to China has become what one Chinese scholar called “a sort
of common sense”.[22] Whilst there
is some logic to the argument, it is an understanding that seems to miss the
very real and indigenous European concerns about the nature and impact of
China’s global role and rise, or the basic understanding in large parts of
Europe that China is simply on the wrong side over Ukraine. And it remains
questionable, to say the least, whether potential investors, governments, and
the EU will be convinced and buy the message that is being sold.
Opening more sectors will be
welcomed, but what is not at all clear is how far and how quickly they will be
opened. And there is likely to remain a lack of confidence from both
international investors and from within the domestic Chinese private sector
that the government is really and unswervingly committed to supporting them and
protecting their interests under all and any conditions. After all, as already
noted, the reason that the leadership now needs a campaign to reassure the
private sector is because of the way that private sector actors – including
very high profile ones – have been treated in the relatively recent past.
And then there is the other side of
Chinese legislative change and innovation to think about. At the same time as
one part of the Chinese party-state emphasises openness and internationalism,
another part has been emphasising national security. So in thinking about
working in China in the future, the sort of messaging emphasised in this paper
so far has to be balanced against those laws introduced over the last decade
designed to given the state considerable power to assert itself in the name of
national security. These include, but are not limited to, the National Security
Law of 2015, the Cybersecurity Law of 2017, Measures for the Management of
Scientific Data from 2018, the Data Security Law and the Personal Information
Protection Law, both from 2021, the Revised Counter-Espionage Law of 2023, and
the Revised State Secrets Law of May 2024.
Conclusion and Next Steps
Whilst Europe and China remain in dialogue trying to find some sort of
common ground to resolve bilateral economic differences, there is no clear sign
that the European side thinks that changes in China have gone far enough to
resolve these differences here and now. As the EU Trade and Economic Security
Commissioner Maros Sefcovic put it during a visit to Beijing in March 2025, the
playing field still needed to be fully levelled.[23]Nor has the global economic
turmoil originating from Washington DC been enough to put bilateral
difficulties to one side to develop a shared Sino-European position and
response. Though given the speed at which US economic policy seems to be
changing, it's probably wise to provide the caveat “to date” to any observation
about the nature of economic change and the global order in Trump’s new era.
Perhaps the key to future perceptions and relations will be how the
announced experiments and pilot schemes play out. And also what happens when
(or perhaps if) they break out of their initial limited scope to become
normalised national policies. Signalling and messaging does have an important
role to play, and the performativity of announcing policy changes and
aspirations should not be ignored. But real trust and confidence comes from
doing rather than saying; and not just doing, but doing with clarity and
consistency. Moreover, not just doing during good times, but also when things
get more challenging too.
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Co-funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or European Research Executive Agency (REA). Neither the European Union nor the granting authority can be held responsible for them.
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[4] The Law on Foreign-Capital Enterprises, the Law on
Sino-Foreign Equity Joint Ventures, and the Law on Sino-Foreign Contractual
Joint Ventures.
[6] Shaun Breslin, China Risen? Studying Chinese Global Power,
(Bristol: Bristol University Press, 20211), p.97.
[8] For
details, see Shaun Breslin, “Foreign Direct Investment in the People’s Republic
of China: Preferences, Policies and Performance”, Policy and Society, 25 (1) 2006: 9-38.
[12] “2024 Yearender: China
advances opening-up with landmark policies in 2024”, Global Times, 20th
December, available at https://www.globaltimes.cn/page/202412/1325472.shtml last accessed 13th February 2025.
[13] “Xi delivers important
speech at Central Economic Work Conference”, Xinhua, 17th December, available
at
https://english.www.gov.cn/news/202412/17/content_WS6760b3e6c6d0868f4e8ee061.html last accessed 21st January 2025.
[14]“China to cement legal protection for private sector”,
Xinhua, 26th February, available at
http://en.moj.gov.cn/2025-02/26/c_1072867.htm last accessed 28th February 2025.
[22] As part of private conversations in Beijing, April 2025.
