The Chinese government plans to allow foreign companies to set up wholly-owned steel manufacturing plants in four free trade zones (FTZ), according to a circular issued by the State Council.

Citing the State Council circular, South China Morning Post reported that foreign companies would no longer have to fulfill mandatory requirements like stake control restrictions and other conditions while investing in China's steel industry.

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"The ban on foreign-controlled shareholding and qualification hurdles imposed on foreign investors will be canceled temporarily," the circular said. "The establishment of foreign wholly-owned steel manufacturing firms will be allowed."

These concessions will be implemented in free trade zones of Shanghai, Tianjin, Guangdong and Fujian provinces.

According to China Daily, these relaxations are temporary and are subjected to revision from time-to-time by concerned authorities.

Despite the fact that China is the biggest consumer of steel, only handful of renowned foreign steel companies have been able to make a sizeable investment in the country's steel industry. This includes Luxembourg-based ArcelorMittal and Japan's Nippon Steel & Sumitomo Metal Corp.

Many blame China's strict policies for lack of foreign investment. Just a week ago, many European steel manufacturers pressurized European officials to take a tough stance against China. The manufacturers reportedly pressurized European officials to raise the issues of steel overproduction and a host of restrictive policies followed by the Chinese government.

Most analysts feel that this new temporary relaxation will help in shoring up foreign investment in China steel industry and is expected to make the industry even more competitive. However, concerns remain over how these new concessions will impact China's problem of steel overproduction, which is wrecking havoc in the global steel industry.

TagsChinese Steel, china, China steel, Chinese economy news