China moves to encourage foreign reinvestment as FDI slumps

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BEIJING (Reuters) -China has unveiled new measures to encourage overseas investors to reinvest their profits within the country, its latest efforts to reverse a decline in foreign direct investment.

China has in recent months taken a series of measures to boost foreign investment, including opening more sectors to overseas investors, as rising trade tensions due to U.S. tariffs cloud the country’s economic outlook.

Foreign direct investment in China totalled 358.2 billion yuan ($50 billion) from January to May, down 13.2% from the same period last year, data issued by the commerce ministry showed.

Foreign investors are encouraged to reinvest in China, including setting up new firms, increasing capital in existing companies and acquiring shares in Chinese firms, according to a notice issued by several government agencies.

The agencies include the state planner, the finance ministry and the commerce ministry and the central bank.

China has already introduced tax incentives to encourage foreign companies to reinvest profits earned in the country.

Local governments will establish project databases for reinvestment by foreigners and provide project services and support, according to the notice.

China will also support foreign investors in using flexible methods such as long-term leasing of industrial land, lease-before-transfer when reinvesting, to help reduce land costs, the agencies said.

To further ease investment processes, approval procedures for foreign shareholder loans and Panda Bonds required for eligible reinvestment by foreign firms will be simplified, according to the notice.

China’s financial institutions have also been tasked with developing innovative products and services to support reinvestment by foreign enterprises, it said.

($1 = 7.1794 Chinese yuan renminbi)

(Reporting by Kevin Yao; Editing by Emelia Sithole-Matarise)