The Tianjin Economic-technological Development Area (TEDA) focuses its attention on attracting foreign investment. Recently TEDA turned down a foreign investment project of over US$100 million. This proposed paper products processing project failed to receive approval for three reasons: the foreign project would encompass a large area, require high-energy consumption and create heavy pollution.

This is one of the over 100 investment projects that TEDA has rejected in the past year. Li Yong, director of the TEDA management committee, confirmed that the local environment protection department turned down all these projects because they did not meet environment standards.

"Low energy consumption" and "low pollution" have become the new values that the TEDA reviews when considering foreign investments, he stressed. "This new standard has actually brought us more high-quality foreign investments. Among all the newly-approved investment ventures in the first half of this year, the number of R&D projects and new-types of service industries have increased by at least 15 percent, as compared to the number of the same period last year."

At present, TEDA is leading the nation in environment protection. For every 10,000-yuan of output value, the energy consumption is 206 kilograms of standard coal, the water consumption is 7.88 cubic meters, and the comprehensive recycle rate of wastes reaches 89 percent.

Setting of "environmental threshold" standards didn't cause TEDA to lose its "competitive advantage" and push away foreign investment, "Because most areas in China have set up similar 'environmental thresholds'," Li said.

For example, Wuxi City, located in Jiangsu Province, refused a US$1.8 billion paper-making project; Songjiang Industrial Zone of Shanghai also rejected a 1.9 billion yuan (US$251 million) project; Kunshan Industrial Zone, located in Jiangsu Province, even spent 500 million yuan (US$66 million) to move out its heavy-pollution enterprises in the past three years.

Xu Fu, a professor of Nankai University, pointed out that as China's resources and environment problems are becoming more serious, the tactics and strategies regarding foreign investments are also evolving from "attracting and inviting foreign investment enterprises" to "choosing the appropriate investment enterprises."

Relevant statistics show that by the end of 2006, China had approved more than 590,000 foreign-funded enterprises, with a total foreign capital of US$685.4 billion.

Foreign enterprises have brought China capital and technology. But various high-energy consumption and high pollution projects have also placed a heavy burden on the country's resources and environment.

Along with economic development, China now has various industries with the capacity to produce surplus goods and materials. The country currently has an adequate foreign exchange reserve and abundant domestic capital. In fact, China is now in a position to optimize its foreign capital structure. Foreign investment for the sake of foreign capital is no longer required; rather "high-quality foreign capital is being sought".

In Xu's opinion, after setting "environmental thresholds," the original policies that favored regional development will be replaced by new policies that promote favorable industries. Foreign enterprises utilizing low technology and creating heavy pollution will gradually leave the Chinese market.

Some professionals have also pointed out that China's local economies have developed unevenly. There is a large gap among the various regions that accept foreign investment. Economically backward areas still have strong needs for foreign funds. More time is needed for people to change their old concepts regarding foreign investment.

(China Development Gateway by Xu Lin August 14, 2007)