Editor's letter: Clear objectives

It came as no surprise that China's most recent foreign direct investment (FDI) rules, revamped in April, focused heavily on encouraging the inflow of capital into onshore environmentally-friendly and high-tech businesses. This reflects some of the key policy objectives most likely being discussed now by China's authorities as they draft the country's 12th Five Year Plan for 2011-2015. Being at the centre of the world stage, China is strategically developing initiatives to boost itself into the same sphere as its powerful global counterparts on issues that strike near and dear to their hearts.

Even though media reports recently announced that China would inherit the crown from the US as the world's biggest manufacturing nation next year, with an estimated factory output of $1.87 billion, the government is trying to move away from its incarnation as the world's sweatshop. Well that's not entirely true. Though perfectly happy to hold the title of top goods producer, it's the string of adjectives that are commonly associated with the heavy manufacturing industries that she isn't comfortable with: dirty, polluting, wasteful, contaminating, damaging, etc.

We all know the developed countries have bumped the environment higher and higher up on their agendas over the past decade, and China is rapidly catching up. The newest FDI regulations emphasise the importance of environment-saving industries, and they offer investors financial subsidies and a bevy of tax incentives to invest here.

And then there's technology. The gap China so desperately wants to close up. It faces a difficult uphill battle with the first world nations. On one hand, companies in the US and the EU are wary of transferring any technology or intellectual property to the PRC as part of plans to develop their China operations, but on the other, they are opposed to China home-growing its own innovations. The US International Trade Commission recently heard two days of complaints from American companies lamenting China's indigenous innovation policies, which were amended in April 2010 (see page 6 for further details).