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China Cracks Down on Non-Productive Overseas Investments, To Favor Investment in Belt and Road, Real Economy

Aug. 21, 2017 (EIRNS)—Three days ago, China’s State Council released a further guidance on the direction of overseas investment. Prepared by the National Development and Reform Commission (NDRC), it would please Alexander Hamilton no end.

According to Bloomberg’s Aug. 18 wire on the guidance, three categories—banned, restricted and encouraged—have been established for overseas investments by Chinese companies, summarized by Bloomberg as follows:

"Banned: Core military technology, gambling, sex industry, investments contrary to national security;

"Restricted: Real estate, hotels, film, entertainment, sports, obsolete equipment, investments that contravene environmental standards;" and

"Encouraged: Investments that further Belt and Road framework, enhance China’s technical standards, research and development, oil and mining exploration, agriculture and fishing."

The guidance is the latest in a series of dirigist measures taken by the government to crack down on speculative activity, dry up "shadow banking," and shore up foreign exchange reserves, so as to concentrate on development.

Chatter in Western media about China moving to restrict thereby its foreign investment generally, is hogwash. Bloomberg quoted from the NDRC statement on the guidance:

"Some companies focused on property rather than the real economy, which, instead of boosting the domestic economy, triggered capital outflows and shook financial security."


"some companies disregarded the environment, energy and safety regulations in target countries, which resulted in disputes and impaired China’s image,"

according to Bloomberg.

Even an inherently-incompetent machine translation of the guidance makes clear that the measure aims to promote those overseas investments along the Belt and Road which serve to expand international production capacity, build infrastructure and connectivity, strengthen cooperation with overseas high-tech and advanced manufacturing enterprises, encourage establishment of R&D centers abroad, expand agricultural cooperation with foreign countries, etc., all aimed at achieving "win-win" investment cooperation.