China will gradually scrap restrictions on the destination, stock ownership and business scope of foreign investment in the service sector, a senior economic planner said on Saturday.

Zhang Mao, vice minister of the National Development and Reform Commission (NDRC), said the country would stick to its opening-up policy and promote a "quantity-to-quality transformation in attracting foreign investment".

He added existing restrictions on foreign investment in key industries concerning China's national security and its citizens’ livelihood remained unchanged.

"The point (of the transformation) is to absorb advanced technologies and management skills from foreign countries," he said. "Foreign investment companies are expected play a positive role in this regard."

Speaking at a multinational CEO roundtable on Saturday, he said foreign investment would be encouraged to enter high-tech, equipment and new material manufacturing and logistics businesses. He added the central and western hinterlands were open for foreign investment with more incentives.

But Zhang stressed that foreign investors were restricted from setting up businesses for export only in China and banned from creating polluting projects and those that rely on consuming too much energy and resources.

Chinese authorities would also help to create a sound investment environment by simplifying examination and approval procedures and steadily accelerating the free exchange of the country's currency under the capital account.

The government would establish a cross-department supervision mechanism over foreign mergers and acquisitions in effort to safeguard national economic security, he said.

Assistant Minister of Commerce Chong Quan said multinationals were encouraged to strengthen cooperation with their Chinese partners in promoting regional development, technological innovation, outsourcing services, product safety and exercising corporate social responsibility.

Chong said his ministry had named 10 cities where "conditions are mature", the "base cities" of outsourcing services. They are Beijing, Dalian, Xi'an, Shenzhen, Chengdu, Wuhan, Nanjing, Shanghai, Tianjin and Jinan.

By 2010, China's export volume of outsourcing services was expected to double that in 2005, he added.

New foreign investment guide

On Nov. 7, China released a new guide of industries open to foreign investment and foreign companies. It also listed those that were banned or restricted from entering the Chinese market.

Foreign investors are invited to join efforts to promote the recycling economy, clean production, renewable energy utilization and ecological environment protection but prohibited from exploiting "important and non-renewable" mineral resources.

The new guide replaced the 2004 version and takes effect on Dec. 1.

Since 1997, China has revised the industry guide for foreign investors on three occasions in hope of channeling foreign investment to serve the needs of industrial restructuring.

The current policies to attract foreign investment were made 28 years ago when China was desperate for investment and foreign currency.

However, the country has been the largest recipient of foreign investment among all developing nations for 15 consecutive years. A 2004 report to the UN Conference on Trade and Development noted the country attracted a per capita foreign investment of 47 U.S. dollars, much lower than the 534 U.S. dollars per person that was invested in developed countries and below the world average of 107 U.S. dollars. Product safety

In his speech at the roundtable, the assistant minister stressed that China has taken a highly responsible attitude towards product safety, urging multinationals to join the nation's efforts to guarantee product safety.

"Made in China" is a fruit of international endeavor because more than 50 percent of China's exports come from the processing trade sector, said Chong, "the exported products were manufactured in line with foreign standards and foreign customers' requirements," he said.

Meanwhile, products made by foreign invested companies in China comprised a majority of the nation's exports, accounting for 58 percent of the total export volume, said Chong.

"China should not be the only one to blame for defective products," said the assistant minister, "product safety is a serious matter for the world as a whole and multinationals bear key responsibilities in coping with the challenge,"

He said multinationals should keep a close watch on design, inspection and sales of their products and make sure their raw materials are up to safety standards.

In the wake of headline food scandals, China's cabinet approved in principle a draft law on food safety to address the "weak points" in food production, processing, delivery, storage and sales at the end of October.

The draft law proposed a food safety risk supervision and evaluation mechanism to provide a "key basis" for constituting food safety standards and food born disease control measures. The mechanism demanded a "unified, timely, objective and accurate" disclosure of emergency information.

(Xinhua News Agency November 18, 2007)