China Needs to Focus on 'Soft Power' to Keep Foreign Investment

Shaun Rein of the China Market Research Group submits:

Originally published on CNBC

There have been increasing fears about rising protectionism in China, due to Beijings push for innovation that have encouraged the rise of domestic players, arguably at the expense of foreign ones.

Several multinational firms have weighed in on the issue: General Electric's (GE) CEO Jeffrey Immelt last month said GE was facing the toughest climate for doing business in China in 25 years, and that the firm was being squeezed out of lucrative government contracts. The heads of German firms BASF (BASFY.PK) and Siemens (SI) have also flagged similar concerns.

Are they right? Is China closing the door to foreign firms? The answer lies in reality and perception.

The reality is, the country is not becoming more protectionist just that some sectors that have never been open to foreigners, have remained that way. Energy and financial services industries, for example, which have been viewed by


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