Recently, a theory on China's investment climate has been rather rampant, and has been taken advantage of by some to spread negative and pessimistic information about the country. Some experts point out that in recent years, thanks to the Chinese Government's efforts to improve basic infrastructure and labor quality as well as relieve businesses of tax burdens, the local investment environment has maintained development. No "deterioration" has been noted. Meanwhile, given the country's prosperous economic prospects and huge market space, as well as its rational industrial structure and striking advantages in attracting foreign investment, China will remain a hot spot and a magnet to attract capital.

"Change" not "deterioration"

Experts believe that the investment environment in a country covers many factors. "Super-national treatment," as an interim policy to attract foreign capital, is just a reference, but never the major or even only criteria to assess certain investment conditions. According to international standards, the indexes to judge a country's investment environment include human resources, land, capital and raw materials, as well as basic infrastructure, market stability and scale, and the government system. Today, compared to its developing neighbors and developed economies, China boasts a much better investment environment.

"To cancel super-national treatment would help create a fair environment for business competition," said Zhang Ning from the National Academy of Economic Strategy at the Chinese Academy of Social Sciences. The assessment criteria for a country's investment environment are supposed to cover many aspects.

"Apart from well-developed basic infrastructure, improved labor quality and a fair tax burden, in recent years, with the improvement of China's legal system and government policies, it is now able to ensure the security and legality of foreign investment so that investors can enjoy good conditions for business performance."

Meanwhile, it's important to note that adjustment of investment policies does not intend to shut doors towards foreign investors. "Change" does not necessarily mean "deterioration." Some experts point out that based on the standards for attracting investment, in 2012, China's absorption of foreign capital exceeded $120 million, ranking second among global economies and maintaining first place among developing countries for 21 years.

Striking advantages in investment environment

"In the past 35 years since China's adoption of reform, it has opened its domestic market to the outside world and made great efforts to improve its investment environment. As a result, foreign investment in China has grown quickly over many years. By the end of 2012, China's use of foreign investment had accumulated to 1.28 trillion," said Du Ying, Deputy Director of China's National Development and Reform Commission.

"Well-developed basic infrastructure construction is one of the most important reasons for China's attraction of foreign investment." Du Ying believes that the country's great efforts to develop basic infrastructures have helped to reduce the cost of logistics and made convenient economic and trade communication. This provides a very good environment for business investment and development.

"Constant improvement to labor quality is another important reason why China is so attractive." Zhang Ning thinks the rising labor cost in the country could never be seen as the deterioration of its investment environment. "The existence of a large amount of cheap labor forces is changing because China's labor quality keeps improving. This situation will help raise the country's status and enhance its function in the global value chain."

China's attractiveness for foreign investment could also be attributed to relatively low tax burdens. Some experts point out that taxation inflicts a direct impact on business profits, and thus should not be neglected in decision making.

Nowadays, China levies income tax on domestic and foreign enterprises at a rate of 25 percent and imposes a lower rate on small and micro businesses, as well as high-tech enterprises. The U.S. enterprise income tax rate stands at 39 percent while that of Japan is as high as 42 percent. Therefore, even if foreign businesses no longer enjoy lower tax rates than their Chinese counterparts, these businesses could still pay taxes at a much lower rate than in some developed economies.

Remaining an investment hot spot

"Nowadays, there still exist many uncertain and unstable factors in the process of global economic recovery. China is also faced with many challenges in its efforts to maintain sustainable and stable economic development. However, we believe that China still boasts relatively striking advantages in absorbing foreign capital, so investor confidence remains unchanged," said Shen Danyang, spokesman for the Ministry of Commerce. Some reports have also made an assessment of China's environment for foreign investment.

A.T. Kearney, an international consulting agency, recently issued a 2013 foreign investors confidence index report showing that the Chinese market is still quite attractive due to its huge population, rising incomes and accelerated urbanization. Boston Consulting Group (BCG) also recently issued its survey result, which shows that 83 percent of transnationals believes China is a very important market and that despite the slowdown of economic growth, it remains the most important emerging market for multinationals."

Improving the investment environment will help China remain a global investment hot spot. Some experts point out that, apart from the bright prospect for economic growth and a huge market, China also provides developed supportive industrial facilities. Compared with other developing countries, China has already built up a system where industries support each other. With a relatively well-developed industry chain and a more reasonable industrial structure, upstream and downstream industries will find it easier to develop in certain areas to promote production, innovation and logistic efficiency.

"Absorption of foreign capital is predicted to remain stable this year. During the next stage, we are going to further improve the investment environment, enhance comprehensive advantages in making use of foreign capital and promote overall efficiency by practicing a more proactive opening up strategy," said Shen Danyang.