(1) Recent policies of Ningxia to promote inward and outward investment
In order to implement that guiding principles of President Xi Jinping’s series of important speeches, take the initiative to participate in the implementation of the BRI and speed up the opening-up, Ningxia issued a series of policies to provide support and build platforms for opening-up. In the space of a year, three policy documents were issued, playing an important role in promoting the development of inward and outward investment in an open Ningxia.
In July 2015, the Sixth Plenary Session the Eleventh CPC Committee of Ningxia Hui Autonomous Region adopted Opinions on Participating in the Implementation of the Belt and Road Initiative and Speeding up the Construction of an Open Ningxia (NDF  No. 22). The document clearly defined the overall requirements and objectives of the construction of an open Ningxia, and proposed that Ningxia should always combine further opening-up with deepening the reform, bringing-in with going-global, and all-round opening-up with key breakthroughs, making good use of the two golden platforms, i.e., the inland opening-up pilot economic zone and the China-Arab States Expo, and strive to level up the opening-up of Ningxia to the outside world.
In October 2015, the General Office of the People’s Government of Ningxia Hui Autonomous Region issued Several Opinions of the General Office of the People’s Government of Ningxia Hui Autonomous Region on Supporting the Going Global of Enterprises (NZBF  No. 138), which is an important supporting document of the Opinions on Participating the Implementation of the Belt and Road Initiative and Speeding up the Construction of an Open Ningxia. In July 2016, the General Office of the People’s Government of Ningxia Hui Autonomous Region issued the Three-year Action Plan for Accelerating the integration of Going Global Efforts into the Belt and Road Initiative (2016-2018) (NZBF  No. 116). Centering on speeding up the pace of going-global, the plan detailed the work for Ningxia’s going-global campaign in the next three years, made a clear division of responsibilities and tasks for all departments, and called for building a carrier for foreign economic and trade cooperation, and speeding up economic and trade investment cooperation, expand areas of cooperation, establish a database of BRI cooperation projects, smooth the channels for economic and trade cooperation, increase fiscal, taxation, financial and policy support for going-global, and improve cooperation environment.
- (2) Inward and outward investment of Ningxia in 2015
- 1) GROWTH OF INWARD AND OUTWARD INVESTMENT IN 2015
In 2015, Ningxia’s actual utilization of foreign capital amounted to USS210 million, a 50.5% year-on-year increase. It absorbed US$180 million of foreign direct investment, a 101.6% year-on-year increase, and used USS30 million of foreign loans, a decrease from 2014.
In 2015, the region’s overseas investment reached US$1.45 billion, a 310% year-on-year increase. More than 90% of this was for three major projects (including the acquisition of Shanda Games Limited) carried out by Ningxia Zhongrong Legend Equity Investment Partnership Enterprise, and Ningxia Yilida Capital Investment Limited Partnership. All other outward investment projects were still small projects with investment in the millions.
- 2) STRUCTURE OF THE INWARD AND OUTWARD INVESTMENT
- i) Utilization of foreign capital. In 2015, there were 37 new foreign investment projects in Ningxia, a 68% increase over 2014. The contractual foreign investment came to US$1,018 billion, a sharp increase of 1.7 fold from the previous year, laying a solid foundation for the actual utilization of foreign capital in 2016.
Foreign investment projects mainly covered manufacturing (processing of wine, cashmere textile products, halal food production, new energy and metallurgy), power, heat, gas and water production and supply (operation of oil and gas stations, sewage recovery and utilization), construction and operation of sports facilities, development and utilization of water-efficient irrigation technology, etc. Manufacturing and energy sectors have become key areas of investment, contributing more than 60% of the foreign investment projects. In terms of investment sources, the Hong Kong SAR was the largest contributor with 20 projects, 54% of the total. Four projects were invested in by US companies, four by Malaysian companies, three by Taiwanese companies. Yemen, Israel, Egypt, Jordan, Australia, and France each contributed one project. Active foreign investment promoted the development of relevant industries, enriched the content of foreign investment in Ningxia, and raised the level of foreign capital utilization.
ii) Overseas investment. In 2015, overseas investment of Ningxia exceeded, for the first time, the foreign investment it received. Overseas investment activities were very active, producing a number of leading overseas investment enterprises such as Ningxia Zhongyin Cashmere International Group Co., Ltd. and Ningxia Diantong. Investment mainly went to cashmere textiles, crop cultivation, building materials, and metallurgy, presenting a diversified investment portfolio. The number of destination countries and regions increased as Cambodia, the United States, the United Kingdom and Oman joined the list.
- 3) PROBLEMS
- i) Foreign investment. First, in 2015, foreign investment came in for large projects early in the year and the total amount of foreign investment soon exceeded that of 2014, but when such big projects were included the overall growth of FDI was not significant. Second, Ningxia’s economy is small in scale, with an unreasonable industrial structure and an ordinary innovation-driven development
Regional investment analysis report 2015 247 capacity, plus a serious shortage of innovative, interdisciplinary, foreign-oriented talents, which hindered foreign investment attraction. Third, affected by the slow recovery of the international economy and the backflow of the manufacturing industry to developed countries, large amounts of foreign investment concentrated in the processing of agricultural and sideline products, dairy products, textiles, metallurgy and energy, while little investment was directed to emerging industries such as high-tech industries, big data, health and elderly care, which made it difficult for Ningxia to attract more foreign capital.
ii) Overseas investment. First, the overall strength of overseas investment of Ningxia did not increase significantly, and large-scale overseas investment projects came more or less by chance. Except for several large projects, most overseas investment projects of Ningxia were small ones worth millions. The overall growth of overseas investment was not obvious, and the stability and sustainability was limited. Second, overseas investment concentrated in a few areas such as textiles, agriculture, construction, and building materials. The cooperation with overseas enterprises in high-tech projects did not progress much. Third, the overall strength of going-global enterprises was comparatively weak. Although Ningxia enterprises showed advantages in iron and steel, electrolytic aluminum and cement and relevant enterprises had a strong desire to go global, they faced problems such as competition from peer enterprises in China, and weak ties with targeted countries and regions. Apart from these, overseas investment enterprises had no connection with one another, and their projects were scattered, with no clustering effect.
4) DEVELOPMENT TRENDS AND PROSPECTS FOR 2016
In 2016, Ningxia will focus on the building of an open Ningxia, actively participate in the implementation of the BRI, make efforts to enhance the capacity to support open economic development, improve infrastructure connectivity, build highly influencing platforms for opening-up, and promote coordinated development of economic and cultural communication. The target of total foreign capital utilization for 2016 is US$264 million, an increase of 21%. This includes US$214 million in FDI, an increase of 15%, US$50 million of foreign loans, up 64%. The scale of overseas investment is expected to be around the same as in 2015.
First, Ningxia will continue to do a good job in the management and guidance of foreign investment projects. In view of the transformation of the foreign capital project management model, the autonomous region will further streamline administration and delegate power, improve procedures, reduce discretion in power use, continue to provide high-quality investment consulting services to enterprises, and strive to attract and implement more foreign capital projects. In light of the problems faced by the development and reform departments at city and county levels, such as the shortage of foreign investment projects, lack of experience and full-time personnel, Ningxia will continue to strengthen guidance and training so as to help these departments build their capacities to attract foreign investment so that they can bring more foreign investors to Ningxia.
Second, it will accelerate the construction of overseas industrial parks. Ningxia will combine the BRI, the opening-up strategy and the international capacity cooperation initiative, study key issues associated with Ningxia’s foreign capital utilization and overseas investment, give effective assistance to the construction of overseas industrial parks, and accelerate the construction of overseas industrial parks such as the China-Oman and China-Saudi Arabia industrial parks and the Mauritania agricultural cooperation park.
Third, Ningxia will actively guide and support the development of advantageous industries, promote the active participation of large and medium-sized enterprises in the international division of labor, build a number of overseas industrial parks as well as economic and trade cooperation zones in BRI countries and regions, so as to encourage Ningxia’s advantageous industries like power generation and transmission, metallurgy, the chemical industry, equipment manufacturing, building materials, and modern agriculture, to go global. It will encourage enterprises to take technologies and standards abroad, explore foreign markets, and seek win-win cooperation. It will encourage qualified enterprises to establish cooperative R&D institutions abroad, hire and attract local scientific and technological talents, conduct transnational scientific and technological R&D cooperation, enhance the core competitiveness of enterprises in overseas markets, so as to build the momentum for going-global and achieve sustainable development.
- (3) Investment in and from BRI countries in 2015
- 1) INWARD AND OUTWARD INVESTMENT
In 2015, Ningxia actively promoted inward and outward investment in and from BRI countries. Ningxia Zhongyin Cashmere International Group Co., Ltd. actively increased investment to textile facilities in Cambodia, Ningxia Diantong succeeded in acquiring an American company, Ningxia Zhongrong Legend Equity Investment Partnership Enterprise and Ningxia Yilida Capital Investment Limited Partnership continued their acquisition of Shanda Game Limited, Ningxia and Oman reached consensus on building the China-Oman Industrial Park, and progress was smooth toward building an agricultural park and a marine industrial park in Mauritania.
2) DEVELOPMENT TRENDS AND PROSPECTS FOR 2016
In 2016, Ningxia will accelerate the implementation of its opening-up strategy, strive to build a new open inland economic system, and actively promote the development of inward and outward investment.
First, it will actively build a carrier for economic and trade cooperation, guide and support local enterprises in agriculture, animal husbandly, textile and garment, equipment manufacturing, food processing, energy and other industries to make industrial investment and launch M&A projects in BRI countries,
Regional investment analysis report 2015 249 support entities and enterprises, including the Yinchuan Economic and Technological Development Zone, to take the lead in building overseas industrial cooperation zones as well as economic and trade cooperation zones in Saudi Arabia, Oman, Mauritania and the United Arab Emirates.
Second, it will enhance economic, trade, and investment cooperation in line with the going-global strategy. It will help enterprises make overseas investment, expand overseas project contracting and labor cooperation, motivate local enterprises to cany out infrastructure construction, geological and mineral exploration, mining and other businesses in Africa, Central Asia and Southeast Asia, and promote overseas project contracting. It will also carry out international capacity cooperation, actively motivate Ningxia enterprises who have advantageous capacity in areas of iron and steel, electrolytic aluminum, ferroalloy, cement, and plate glass to establish overseas production bases in BRI countries in Central Asia and West Asia, in order to promote the orderly transfer of Ningxia’s advantageous industrial capacities abroad and enhance international capacity cooperation.
Third, it will create a BRI economic and trade cooperation project database. The database will contain projects of three categories, i.e., projects under construction, proposed projects and candidate projects. It will be updated regularly and contain a list of key enterprises to be supported. Projects will mainly come from key fields such as infrastructure, advantageous industries, and economic and trade cooperation.
Fourth, Ningxia will smooth the channels for overseas economic and trade cooperation. It will encourage large and medium-sized state-owned enterprises to cooperate with small and medium-sized enterprises, institutions of higher learning and scientific research institutes to go global in clusters. It will support local enterprises to establish strategic partnerships with backbone Chinese enterprises with international presence, related foreign enterprises and chambers and associations of commerce, so that these enterprises may set up branches in Ningxia and push local enterprises abroad. Ningxia will also speed up the construction of overseas marketing networks and give better play to the functions of its overseas representative offices for economic and trade cooperation.
Fifth, it will increase fiscal, taxation, financial and policy support for outward investment. It will increase financial and policy support, and give appropriate subsidies to enterprises working on greenfield investment projects overseas, resources development, cross-border M&A, marketing networks, etc. It will offer tax cuts to going-global enterprises for their income generated abroad according to law. The overseas income of high-tech enterprises may enjoy preferential income tax policies according to relevant regulations. Ningxia will also strengthen the financing matchmaking services, and improve financing insurance services.
Sixth, it will further facilitate inward and outward investment. It will further improve the workflow for foreign investment and overseas investment, simplify the procedures for review and approval of investment projects as well as the approval and filing of enterprises, promote the facilitation of foreign investment and overseas investment, and improve the efficiency of review and approval.
Seventh, it will strengthen talent cultivation. Ningxia will encourage enterprises to cooperate with universities, trade associations and scientific research institutes to cultivate a number of interdisciplinary talents for transnational business management and R&D, actively introduce high-level overseas talents for transnational management and R&D, and establish a BRI expert database.