The Ministry of
Commerce issued the Administrative Measure on Foreign
Investment in Commercial Areas on Friday, which incorporated
China's promises to the World Trade Organization.
The measure will replace a pilot rule on foreign-funded
commercial enterprises implemented in 1999.
The measure made it clear that China will lower its restrictive
conditions for foreign-funded commercial enterprises according to
its WTO commitments. The commercial industry's opening to foreign
investment will turn into a normal procedure rather than a pilot
trial, the measure says.
It also states that China will abolish joint-venture
requirements and end restrictions on the location and number of
foreign-funded stores after December 11 this year.
They are currently required to operate through joint ventures in
which they can hold a maximum 65 per cent stake. And the stores can
only open in major cities.
Since the commercial area opened to foreign investment, some
US$3 billion has been poured into 270 foreign-funded commercial
enterprises with 2,200 outlets.
But the measure did not involve articles to punish law-breaking
foreign investors in the commercial sector, which the Ministry
proposed in the draft.
The draft said law-abiding foreign retailers would be permitted
to expand, while a one-year curb on expansion would be imposed on
those who had violated the regulations. Chronic violators could be
banned indefinitely from expanding their operations.
Many foreign giants opened stores illegally by skipping over the
central government and making deals with local government. Many
domestic commercial companies have piled pressure on the government
to curb the illegal expansions by laying out such rules.
But the new measure just mentioned that foreign investors can
open new stores only if it fits with the city's commercial
layout.
The ministry has asked the major cities to submit their plans
for commercial layout before the end of this year.
Huang Guoxiong, a professor from Renmin University, said most
foreign investors have amended their behavior. For example,
Carrefour was allowed to open new stores this year after it slashed
its stake in three supermarkets in China to abide by government
caps on foreign ownership.
(China Daily April 17, 2004)