China to ease free-trade zone rules

China plans to suspend some laws on foreign investment in proposed new free-trade zones, including Shanghai, as part of Premier Li Keqiang's drive to open the economy to sustain growth.

China plans to suspend some laws on foreign investment in proposed new free-trade zones, including Shanghai, as part of Premier Li Keqiang's drive to open the economy to sustain growth.

The changes will provide innovation, remove unnecessary administration and help transform the state's role in the economy, said a statement from the State Council after a meeting led by Mr Li.

China is boosting efforts to attract foreign companies after investment from abroad fell last year for the first time since the global financial crisis. Free-trade zones that will be allowed to cut bureaucracy and test financial liberalisation may offer incentives that help the government maintain economic growth of at least 7 per cent a year as the export- and investment-led model of expansion runs out of steam.

"The Chinese government knows that having foreign investment is a very good thing and they want this to be an attractive market for strategic and financial investors," said Kent Kedl, managing director for Greater China and North Asia for risk consulting firm Control Risks.

"Many foreign investors are concerned about the bureaucracy and lack of clarity around regulations, that's probably the biggest concern when they come in [to China]," he said.

Foreign direct investment in China fell 3.7 per cent last year to $US111.7 billion from a record $US116 billion in 2011, government data showed. Investment rose 4.9 per cent in the first half of this year to $US62 billion.

The American Chamber of Commerce in China has urged the government to open more industries to overseas investors and improve the climate for foreigners, while a European Union business group has warned that optimism is declining and the regulatory environment is worsening.

The State Council will submit a draft document to the Standing Committee of the National People's Congress, the legislature, according to its statement. If approved, the State Council will be allowed to suspend some laws on foreign investment, Sino-foreign joint ventures and co-operative enterprises in the free-trade areas, it said.

The State Council said on July 3 it had approved a pilot program to set up the country's first free-trade zone in Shanghai, describing it as an important move to adapt to global economic and trade developments. Shanghai Mayor Yang Xiong said last month the city would accelerate the building of the trial zone in the second half of this year, including creating laws to regulate the project, the Shanghai Daily reported.

One part of the plan includes ending a 13-year ban on the manufacturing and sale of video-game consoles in China, on the condition that companies such as Sony and Nintendo make their products in the new Shanghai area, the South China Morning Post reported.