Principle Of National Treatment, China's Foreign Investment Policy Adjustments

National treatment (NT), also called equal treatment, is the same equal rights given by the host country to foreign enterprises, citizen or traders, as its domestic enterprises, citizen or traders. It is usually the provision in national laws or international treaties, and accepted by most countries. With the development of economic cooperation between countries, NT has extended to other fields, such as international trade and FDI. Since the opening-up policy, China has provided both super NT and hypo NT to foreign investments at the same time, just as other developing countries do, which made China one of the most attractive countries to FDI. However, with China's entry to WTO in 2001, the changes in economic environment also called for adjustments in its FDI policies.Moreover, the Chinese government proclaimed the new Index on Foreign Investments in March, 2002, which has speeded up the implement of NT to foreign investments.In this situation, in order to constitute new FDI policies, which will make FDI play a more important role in the development of China's economy, we must make a thorough research of NT and its influence to China's economy. In the past 20 years, the FDI policies in China has changed a lot and formed a relatively complete system of policies. China's FDI policies deal with many aspects of investments, such as favorable treatment and discrimination:a) Tax rebate. For example, foreign enterprises don't have to pay income tax in the first 2 years and in the next 3 years they only need to pay half of their tax. If the enterprises reinvest in China, the tax they have paid will be returned. b) Foreign enterprises have their own managerial authority. They can make their own decision on their manufacture, purchase, employment and assets, which helps them to do better in the fierce market competition. c) Foreign enterprises have the rights to import and export products, while only a small part of domestic enterprises have the rights.d) Preferable policies on foreign exchange administration. Foreign enterprises have more flexible choices when they lend money from the bank. The requirements for set up a new foreign enterprise are less stringent,e) compared with that of a domestic company. It's more flexible than that of the domestic enterprises.f) Foreign enterprises can borrow money on behalf of the company itself or its investors, while they make overseas financing.g) Lower prices for the use of land than that of domestic enterprises.Super NT has its negative influences too, though it does help China attract plenty of FDI. It causes the competition for FDI among different regions or industries. In order to get more funds, lots of radical measures have been taken across the country, which will do great harm to the domestic enterprises and the health of the whole economy. Hypo NT including measures such as region restriction, local content and so on, which decrease the quantity of FDI and prevent better use of investments and also harm the benefit of investors and the host country. It takes time to solve the FDI problem and we should take different measures according to the development of the economy. The National Treatment is to help make a more open and mature market for FDI and economic development. Each step we take must ensure that it won't harm the heath of the economy. We can take the following measures:9. Unify domestic law to make a better environment for the NT provision.10. Abolish the two tax law system and establish a new tax law for both foreign enterprises and domestic enterprises.11. Keep those policies that do have positive effects on the economy.12. Keep the adjustments of policy consistent with the international treaty.13. Try to make the FDI policies more transparent and stable.14. Give all the foreign investors National Treatment and build an open, equal and fair market.15. Improve the competition ability of domestic enterprises.16. Encourage technical innovation of the foreign enterprises.