SHANGHAI (AFP) — China has released new rules to prohibit or limit foreign investment in the latest tightening move that signals a major overhaul in outlook of the nation's booming but flawed economic model.
In a wide-ranging directive published late Wednesday, China's key economic developmental agency laid out a comprehensive list that at its root highlights what it wants from overseas firms in an economy long dependent on their funds.
The long-awaited review not only unveiled Beijing's future development plans but also suggested a concerted effort to slow the economy's spectacular but unrestrained growth that has horribly damaged its environment, analysts said.
"It's not only a change in the opening up policy but China is reviewing all its economic development and reform policies," said Chen Xingdong, an economist at BNP Paribas in Beijing.
"In the past there was no control -- China just opened the door, the window and let whatever (foreign investment) come in," he said.
"China doesn't now want just rapid growth without paying attention to quality."
The powerful Beijing agency known as the National Development and Reform Commission identified areas from real estate and financials to oil and rare metals as restricted or off limits to overseas capital.
While those industries will be banned or restricted to foreigners, the agency will seek outside investment that can help China to protect its degraded environment, cut pollution and develop renewable energy.
Investment in high technology and advanced materials and equipment manufacturing will also be welcome, but those in production industries in which China has mature technologies and capacity will not, it said.
Analysts said the list underscored Beijing's latest policy shift to restructure its export-driven economy whose booming but lopsided growth has for decades relied on top heavy government and foreign investment to expand.
The Asian giant's meteoric economic rise has come at a heavy price to its environment, amid a widening wealth gap and surging exports that have created a surplus at the forefront of trade spats with major economic partners.
The announcement was not a surprise as the government has long said it would readjust its export-oriented trade policy in the face of the unmanageable trade surplus and surging foreign reserves that have topped 1.43 trillion dollars.
"This was quite long expected -- for China's to become more conservative than before," said BNP Paribas's Chen.
Over the past two years the government has trickled out new restrictions on various industries including tightening its hold on sectors deemed strategic, such as energy, and promulgated an anti-monopoly law.
While the guidelines carried in state press Thursday clarified expectations of a more cautious approach, some analysts also expressed concern for the clear turn towards protectionism.
"The overall direction should be (towards) more open industries rather than the opposite, "said Shen Minggao, an economist at Citigroup in Beijing.
"The government is worried about resources and the rise in commodity prices, and wants to make sure that scarce resources are under control of domestic firms, but that's the direction that we're worried about."
Under the guidelines, foreigners are barred from investing in non-renewable mineral resources, such as tungsten, tin, antimony, molybdenum, as will investment in small and mid-sized oil refineries.
Refining of copper, zinc, aluminium and rare earths will be restricted and so will the exploration for gold, silver and platinum.
High-end real estate such as hotels, villas, offices and malls will also be limited, as will that in property agent companies and brokerages as part of efforts to cool soaring real estate prices nationwide.
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