Foreign investors will soon be allowed to set up wholly owned sourcing centers in selected Chinese cities to help meet the growing procurement demand for Chinese-made products, a senior official at the Ministry of Commerce said yesterday.

Foreign firms in the sourcing centers will be entitled to engage in the export-orientated sourcing business, entrusted product processing, as well as warehouse and information counseling services.

Hu Jingyan, director of the Foreign Investment Administration Department under the ministry, revealed the move yesterday at a seminar in the China International Fair for Investment and Trade being held in Xiamen, East China's Fujian Province.

The State Council has given the go-ahead to the policy and the ministry is working on the practical regulations, which will be announced in the next few months, he said.

The policy comes at a time when more and more multinationals are including China in their global procurement networks and gradually increasing their purchases of Chinese products.

The value of products sourced by foreign companies in China reached US$30 billion last year. The global retail giants Wal-Mart, Carrefour and Metro alone purchased US$15 billion in the country last year, government figures showed.

Hu said: "The lenient policy on the foreign-funded sourcing business aims to make China a more attractive global sourcing center and actively promote quality and price-competitive Chinese-made products on the international market."

Currently, foreign firms can establish Sino-foreign trade joint ventures and solely funded logistics companies in China to run import and export businesses.

According to Hu, the minimum registered capital for a wholly foreign-owned sourcing center will be about 30 million yuan (US$3.62 million).

As for whether foreign firms can have tax refunds on the exported China-sourced products, a major concern of many investors, Hu said the new policy would refer to existing tax regulations for export-orientated foreign investment companies.

"Generally speaking, foreign firms in the sourcing centers can have tax refunds on their exported products," he added.

(China Daily September 11, 2003)