China has been reforming its policies in an effort to discourage overseas investment in energy-intensive, polluting and resource-based ventures — the so-called smokestack industries.

Delivering a work report to the 1st session of the 11th National People’s Congress (NPC) on Wednesday, Premier Wen Jiabao made known China’s determination to end its position as a global center of such industries.

He said, ‘We will limit or ban foreign investment in projects that are energy-intensive or highly polluting, limit or ban foreign investment in some areas of resource exploitation, and correct illegal practices for attracting foreign investment.’

Zhang Yansheng, chief of the Institute of Foreign Economics affiliated with the National Development and Reform Commission, said: ‘Given the size of the Chinese economy, I believe the international community will benefit from the country’s policy adjustments toward overseas investment in terms of resources, environmental protection and the balance of global trade.’

Overseas investors are now being encouraged to enter fields such as recycling, clean production, renewable energy, environmental protection and efficient use of resources.

They are restricted or banned from entering energy-intensive, polluting sectors or certain certain fields of resource exploitation, and export tax rebates for 1,115 commodities in these sectors have been ended.

Zhang Yansheng said the blind pursuit of foreign funds led to many short-lived smokestack factories that turned out low-end goods.

A report released by the China Council for International Cooperation in Environment and Development in late February disclosed that the number of overseas investors investing in polluting industries accounted for about 30% of overseas-invested ventures in 1995 and 84.19% in 2005.
Source: China View