The Chinese government is ratcheting up efforts to lure foreign investment and reverse decelerating inflows, but foreign companies are unhappy with the slow progress China is making in opening up.

Beijing unveiled its revised catalogue on foreign investment at the end of June, reducing market entry restrictions for industries such as transport services and auditing, and shortening the list of sectors that are off-limits to foreign investors in designated free trade zones.

Pan Gongsheng, head of the State Administration of Foreign Exchange (SAFE), delivered a speech at a financial conference organised by the European Union Chamber of Commerce in China on Thursday and answered questions from the chambers member companies.

It was the third time this year that Pan has held public face-to-face dialogues with foreign business leaders who have expressed concern over Chinas limited market access and the disruptive impact of the tightening of capital controls that is part of Beijings daily operations.

The openness is not as fast as expectations would suggest, said Mats Harborn, president of the European Union Chamber of Commerce in China, at a media briefing on Wednesday. The rhetoric is not matched by concrete implementations.

Official statistics have signalled with increasing clarity that foreign investors may be losing interest in China. Ministry of Commerce data indicated that foreign direct investment into China dropped nearly 9 per cent in May from a year ago, marking the metrics largest fall in four months.

Beijing doubles down on luring foreign investors back to China, but will they come?

There are concerns in the government about the loss of steam in inflows of foreign direct investment, which is highly demanded in high-end industries, said Hu Xingdou, a professor with Beijing Institute of Technology.

The decline in foreign investment inflows may lead to the impression that Chinas investment environment is deteriorating and China is retreating from opening up, he said.

The European chamber approached SAFE in December, voicing its concerns about the disruptive impact on capital transfer and overseas payments of Chinas tightening capital controls, especially amid local regulators ambiguous guidance.

As a result, a hot line was established for foreign companies to directly report problems with capital transfer to the foreign exchange regulator in Beijing.

However, the hot line was not fully utilised as foreign companies feared reporting problems might trigger blow back and harsh treatment from local regulators, the EU chamber said. The line has become less and less important as regulators have engaged foreign companies actively to solve problems, according to the EU chamber.

In April, SAFE initiated a roundtable talk at which it sought to solicit feedback on difficulties encountered in capital management from executives of Chinese operators of multinational companies from Europe, Japan and the US such as BMW, Shell, and IBM.

Beijing cuts list of restrictions on foreign direct investment in free-trade zones

One month later, Pan held another dialogue with leading foreign companies, such as Caterpillar, Thyssenkrupp and Dell, to dispel concerns about capital outflows and reiterated Chinas commitment to opening up and facilitating investment.

Nevertheless, foreign companies are calling for concrete movement on opening up market access and creating a level playing field in China.

Wed like to recommend, following ambitions expressed by the State Council No. 5 document on encouraging opening-up and President Xi Jinpings speech in Davos in January, that one comprehensive negative list is used to show which sector is open for any type of companies, Harborn said. Its not meaningful to make a distinction between foreign enterprises and domestic enterprises.

But he also cited a lack of coordination among regulatory authorities and noted that possible conflicts exist between industrial policies and national security law. He suggested regulators increase their transparency in determining the negative list on investment limitation.

Doing so would also help to achieve substantial progress in bilateral investment agreement talks between China and European Union, now in their 14th round of negotiations in Brussels, he said.

China still needs massive foreign investment, especially in the high-end sectors. But China has not done enough in creating a level playing field to protect the interests of foreign investors, Hu Xingdou said.

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Foreign companies dissatisfied with China's slow progress in opening up investment markets - South China Morning Post