Guidelines open more doors to foreign investors

China's economic policy guidelines, which rely on urbanization and domestic consumption as the key growth engines in the medium to long-term, offer huge investment opportunities for foreign investors, according to economists in Hong Kong.

Infrastructure investment is likely to leave more room for the entrance of private companies, including foreign ones, said Ivan Chung, a senior analyst at Moody's Investors Service.

In its key policy agenda for 2013, the central government said it will encourage and increase private and public investment next year.

It will also deliver a positive environment for investment, particularly in infrastructure and irrigation systems. Manufacturing machinery for agriculture will also benefit, he said.

On Monday, Fitch Ratings warned that China's previous investment-led growth pattern is running into constraints given that rapid investment growth will tend to be associated with strong credit growth.

Participation of foreign companies in these traditionally government-controlled infrastructure projects could continue to "limited degree" in the initial stage, but the opening-up will, on the one hand, release the tremendous credit burden that local governments are currently facing, and also help promote productivity given that many foreign companies possess the most advantageous technologies.

"The opening-up is not just for the capital, but also for the higher-end technologies," said Chung.

He said he believes that a greater penetration of private capital into infrastructure and utilities projects will become a trend in China.

The central government has indicated that it will expand the scale of total social financing programs and keep a modest pace of loan growth.

It also has vowed to improve macroeconomic control to promote sustainable and healthy development, and deepen economic reforms.

This has sent a positive message to foreign investors, indicating that the prospects for the investment market will become brighter next year, said Banny Lam, chief economist at ABC International.

"Structural improvements, big or small, could be expected from almost all the economic sectors in China," said Lam.

Given the financial strain on some local governments, this will offer a lot of opportunities to overseas investors, including those from Hong Kong.

Financial reforms - including favorable policies on the stock markets - and the strengthened progress of yuan's internationalization will benefit foreign investors who have the foresight to invest in the Chinese market, Lam said.

He added that he believes that quite a number of international institutions are already prepared to seize the opportunities.

Alaistair Chan, a Sydney-based economist at Moody's Analytics, told China Daily that foreign direct investment in China has been declining for most of 2012, and that the Chinese government, without any doubt, will try to attract more investment next year.

"Hence the policies will likely range from small steps, such as higher Qualified Foreign Institutional Investor quotas, to allowing greater investments in financial firms," said Chan.

litao@chinadailyhk.com