Under the new regulations, the government is continuously correcting its approach to attracting investment.
It’s not that they lack projects; what local governments are looking for are high-quality projects.
These projects must either be of sufficient scale, possess technological sophistication and growth potential, or carry labels such as “specialized, refined, distinctive, and innovative” enterprises, listed companies, or foreign-invested enterprises.
An investment promotion official at a certain industrial park in the north told us that a project developer came to them with several conditions. He followed the proper procedures to submit the proposal, organized discussions, and went back and forth several times—only to hear nothing further.
It’s not that they don’t want the project; it’s just that, under the new regulations, he wasn’t sure what steps he could take to secure it.
Just as localities across the country were universally voicing their difficulties, two events occurred almost simultaneously yesterday.
Xinhua News Agency published the first installment of its “Three Commentaries” series, with a headline consisting of just one sentence: “How Can Investment Promotion Be Reduced to a ‘High-Stakes Gamble’?”
On the same day, the Central Commission for Discipline Inspection and the National Supervisory Commission publicly announced five typical cases of distorted views on political achievements, with blind investment promotion and incurring debt to fund “prestige projects” among them.
Media commentary and disciplinary accountability struck at the exact same issue.
This reflects that investment promotion efforts in some regions have already gone off track and urgently require comprehensive correction and recalibration.
01 Frequent Announcements and Ongoing Strict Investigations into Blind Investment Promotion
First, let’s look at the Central Commission for Discipline Inspection.
Most of the five typical cases of distorted views on political achievements announced yesterday were related to investment promotion.
An official in a city in Southwest China, while serving as the head of a district, approved the launch of multiple industrial clusters without conducting research or seeking expert review, and distributed large amounts of subsidies. Some projects, which did not comply with national policies, ceased production immediately after their production lines were completed.
He spearheaded dozens of investment promotion events, with signed project agreements totaling tens of billions of yuan in investment, yet less than 7% of these projects were actually implemented.
A leading official in a county in central China prioritized economic indicators over ecological red lines, blindly attracting multiple highly polluting chemical enterprises to settle in an industrial park, and even instructed environmental protection authorities to “replace regulation with fines.”
An official in a certain district in southern China implemented debt-reduction measures half-heartedly. In pursuit of visible achievements, he pushed forward a park project despite knowing that land use procedures had not been completed; the project was ultimately ordered to be demolished for illegally occupying farmland, resulting in a loss of state-owned assets.
In other places, authorities vigorously promoted the creation of “viral” tourist attractions despite knowing that the land occupation was illegal and did not comply with planning regulations; the illegally constructed portions were demolished a year later. There were also cases where heads of state-owned enterprises engaged in financing-oriented trade in violation of regulations, similarly resulting in losses of state assets.
While the Central Commission for Discipline Inspection holds officials accountable, CCTV’s *Focus Interview* program has turned its cameras on the ground—revealing that ignoring risks and forcing projects through comes at a heavy cost.
Since the beginning of this year, the program has focused on investment promotion four times. Taken together, the exposed projects reveal several major problems recurring in succession.
Investments made merely to meet quotas—where acquisitions are driven not by industrial development but by the need to fulfill “quantity” performance metrics—represent a fundamental deviation from the original intent.
Preliminary investigations were mere formalities; in a rush to meet the “doubling plan,” local authorities hastily acquired this out-of-town listed company and relocated it back to their jurisdiction in just over three months, without even doing the basic due diligence.
A disconnect between industry and projects: the enterprise’s sector bears no relation to the region’s competitive industries; far from creating synergy, this has instead led to a waste of resources.
A review of common cases of distorted performance-oriented thinking reveals that the harm caused by such misguided views permeates every aspect of the economy.
From an obsession with GDP (Gross Domestic Product) and the blind borrowing to fund half-finished projects, to the “involution” of industrial homogenization caused by reckless investment promotion that ignores reality;from the deterioration of the business environment and the slowdown in private enterprise investment caused by the “new officials ignoring old accounts” mentality, to the false prosperity fabricated through data manipulation; from policies going through the motions—implementing documents merely by issuing more documents—to excessive layering of requirements at every level…
Every instance of a distorted view of political achievement ultimately results in fiscal “bleeding,” the “misallocation” of resources, and shocks to the local economy.
02 The Core Issue Lies in Performance Evaluations and Fiscal and Tax Policies
Simply attributing these issues to “distorted views on political achievements” fails to get to the heart of the matter.
A question worth pondering is: Do the decision-makers really fail to see the risks?
Most of the time, this is not necessarily the case; the root cause of the increasingly cutthroat competition in investment promotion lies more in the system itself.
Lu Ming, Executive Dean of the China Development Institute at Shanghai Jiao Tong University, has repeatedly noted in public:
On one hand, there are performance evaluations: local governments are constantly subjected to tiered assessments by higher authorities based on economic growth and tax revenue targets. The more growth slows, the more they must rely on increased investment and large-scale projects to stabilize the tax base.
On the other hand, there are fiscal and tax considerations: in recent years, revenue from land sales has slowed, leaving local governments short of stable, sustainable funds. Yet they are burdened with a host of expenditures on education, healthcare, and infrastructure, forcing them to find solutions through investment promotion and public investment.
Hu Chaohui, Deputy Director-General of the Comprehensive Department of Institutional Reform at the National Development and Reform Commission, put it even more bluntly.
To boost their track records, some localities have pursued large-scale and rapid project development, even disregarding their fiscal capacity. They have taken on debt to engage in subsidy races and create “policy havens,” plunging investment promotion into a “self-defeating” race to the bottom that ultimately undermines the unified national market.
Li Zuojun and Wang Bingwen of the Development Research Center of the State Council have also written that curbing the “involution” of local investment promotion is an indispensable step toward high-quality development.
What’s even more troubling is that once this cycle of “involution” takes hold, it is extremely difficult for any single locality to break free.
If you stick to the bottom line and refuse to offer incentives, but the neighboring county does, the project will leave in a heartbeat; if you stubbornly hold your ground, you may end up at the bottom of the provincial rankings.
This is precisely why relying solely on local governments’ “self-discipline” and “self-restraint” cannot resolve this “involution.” To pull all localities out of this race to the bottom, we must rely on a single, unified standard to firmly establish red lines from the outside.
This is precisely why a nationwide, unified checklist is essential for this round of rectification.
Looking back, the race initially centered on competing over factors—who could offer lower land prices or more generous tax rebates. In some places, the “collect first, refund later” practice allowed for refunds of up to more than half, effectively carving out a chunk of the national treasury.
Later, when overt rebates were halted, new schemes emerged—such as government-guided funds, state-owned enterprises acting as general partners (GPs), equity performance-based incentives, and reinvestment requirements. These hidden concessions merely donned a more respectable guise; some past new energy vehicle projects exemplify this path taken to its extreme.
The “Regulations on Fair Competition Review” have legally eliminated overt subsidies and below-market land prices, while a State Council General Office document has reined in fund reinvestment requirements. From the “positive and negative lists” for investment promotion to the crackdown on “side agreements,” even verbal commitments have come under scrutiny.
Zhang Yansheng, a researcher at the China Academy of Macroeconomic Research, cautions that while there are already numerous policies in place to regulate investment promotion, the key lies in ensuring thorough implementation without compromise.
This round of crackdowns—combining legal measures, regulatory lists, and accountability mechanisms—is the most thorough to date, driving the shortcut of offering concessions to secure projects into a corner.
However, as long as the root causes—such as performance evaluations and fiscal and tax incentives—remain, the suppressed impulse will likely resurface through another outlet.
03 Without Concessions, How Can We Retain Quality Projects?
The Xinhua News Agency article titled “How Can Investment Promotion Be Allowed to Devolve into a ‘High-Stakes Gamble’?” points out two paths for local investment promotion.
One is to accelerate the establishment of a scientific investment evaluation and risk prevention and control mechanism; the other is to focus on the positioning of their own leading industries and avoid blindly following trends without regard for reality.
The former focuses on how to make sound decisions, while the latter focuses on what it takes to retain projects.
To make major investment decisions more scientific and rigorous, “voting by the People’s Congress” is an approach currently being explored.
This year, Huangyan District in Taizhou, Zhejiang, implemented a vote on major government investment projects for the first time. Two projects—the Yongning Olympic Sports Center and the continuation, supporting infrastructure, and modernization of the Yongning River Irrigation District—both with total investments exceeding 1 billion yuan, were rejected on the spot because more than half of the votes were against them.
For the first time, a decision that would normally have been finalized within the closed loop of the administrative system was blocked by representatives using voting devices.
It was also specified that all major district-level investment projects exceeding 50 million yuan must be subject to a vote. The construction details and progress milestones for each project are integrated into a supervision system and documented in electronic records, allowing People’s Congress deputies to monitor the projects from project approval through to completion.
Regulations at higher levels are also being tightened. The General Office of the State Council’s “Opinions on Deepening the Reform of the Investment Approval System” stipulate:
Strict approval of government investment projects, adherence to the principle of acting within one’s means, strengthened scrutiny of project requirements and funding plans, and the implementation of a lifetime accountability system for decision-makers. Whoever gives the final approval for a project—even if they have been transferred or retired—will still be held accountable through retroactive investigation if major problems arise.
However, while ensuring accountability is firmly established, precautions must also be taken against the opposite extreme.
As accountability tightens, some officials simply avoid complex projects altogether—after all, “better safe than sorry.” The situation described earlier, where “projects are discussed a few times but then never follow through,” mostly stems from this mindset.
Therefore, lifetime accountability alone is not enough; we must simultaneously define clear boundaries for tolerance of errors, so that officials who follow the rules and fulfill their duties need not live in fear even if a project fails. Only by preventing both reckless behavior and complacency can we truly fortify the decision-making process.
There is nothing wrong with localities competing for good projects; that is legitimate competition for the best options. What has truly changed is what localities that successfully secure these projects are doing right.
The most practical factor is a well-developed industrial chain.
Take a power battery project as an example: if it lands in a region that already has battery cell factories and a complete supply chain for anode and cathode materials, upstream and downstream connections can be established immediately; if it lands in a region with no existing industrial base, the company will have to start from scratch just to find a decent supplier, making it difficult to grow even after the project is up and running.
Another key factor is having people who understand the industry. A mature investment promotion team should be able to sit down with a company’s technical lead and discuss process routes, yield rates, and the supply chain—rather than simply handing over materials and quoting rent rates the moment they open their mouths. After all, the professional competence of investment promotion officials is crucial for building trust with companies.
Furthermore, the process must actually be executable. When it comes to bringing projects online, nine times out of ten they get bogged down by hard constraints such as environmental impact assessments, land use, and energy consumption quotas.
The ability to bring relevant departments together around a table under the leadership of top officials—and resolve bottlenecks on the spot—rather than forcing companies to run from one agency to another with stacks of paperwork, is precisely where the gap between regions often widens.
Zhuzhou High-Tech Zone is a positive example highlighted by CCTV.
The local Party Working Committee specifically issued the “Seven Guidelines on Investment Project Negotiations,” clearly stipulating that land acquisition projects must never breach the zero-land-price bottom line, thereby blocking the path of using preferential terms to poach projects.
Starting in 2022, the zone launched a reform to de-administratize its operations, abolishing the original administrative approval departments. Officials transitioned from “managers” to “service providers,” and the zone reorganized into a structure of “six bureaus and one center” centered on project and enterprise services, dedicated to providing full-lifecycle support for businesses and projects.
By leveraging existing strengths in new energy vehicles and new energy equipment to attract investment along the industrial chain, the key to success lies in the depth of services and supporting infrastructure. Yibin has also taken this steady approach, continuously strengthening and expanding the industrial chain around CATL by attracting upstream and downstream enterprises link by link; today, the city’s production and sales of power batteries account for approximately 15% of the national total.
These approaches take time to yield results and do not generate immediate contract signing figures.
To achieve high-quality investment promotion, we must internally refine mechanisms for voting on major investment decisions, implement lifelong accountability and error-tolerance systems; externally, we must deepen our focus on leading industries and upgrade end-to-end enterprise services; and finally, we must adjust performance evaluation standards to correct deviations and irregularities in investment promotion at their root.
In Closing
Looking back at this year’s episodes and bulletins, the lessons learned are sobering.
One after another, these abandoned and inflated projects have not only increased the burden on local finances but also intensified unfair competition, fragmented the unified national market, and planted hidden seeds of concern for the healthy development of industries.
When the tide recedes, the truth becomes clear: the places that initially offered the most incentives may not necessarily retain businesses; those that truly stand the test of time are the ones whose industries, services, and judgment withstand the test of time.
Sooner or later, each region will have to answer for itself the question of what it can rely on to retain businesses.
