Foreign investment welcome
By lifting restrictions and prohibitions and to further expand the fields in which foreign investors are encouraged to invest, both nationwide and especially in central and western China and to extend the preferential policies for foreign investment to certain new sectors. Nationwide, the number of “prohibited” or “restricted” industries for foreign investment has reduced from 48 to 40. The Negative List relevant for free trade zones has been shortened to 37 listed items, down from 45. Additionally, the number of encouraged industries applicable for the whole country has increased from 348 to 415. The foreign investment is welcome to play a positive role in China's industrial development, technological progress and structural optimization.
China pledges to provide equal market access to foreign investment. However, in certain industries, such treatment can be limited for foreign investors. In 2015, China established the negative list management system and updated it on annual basis since 2017. The negative list specifies industries where foreign investors are either restricted or prohibited. Companies operating in the prohibited industries are not allowed to have foreign investments. Restricted industries are usually only accessible to foreign investors through joint venture structures with Chinese companies and often include shareholding limits. In other cases, foreign investors might need prior approval from the Ministry of Commerce (MOFCOM) to invest in a restricted industry. For any industries that are not specifically identified in the Negative Lists, foreign investors are treated equally as domestic investors, and no additional restrictions on market access will apply.
At the same time, the Encouraged Catalogue lists industries where foreign know-how and investment are welcome.
On the 30th of June 2019, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) jointly issued the 2019 Edition of the Special Administrative Measures (Negative List) for Foreign Investment Access (hereinafter referred to as “National Negative List”), of the Special Administrative Measures (Negative List) for Foreign Investment Access in Pilot Free Trade Zones (hereinafter referred to as “FTZ Negative List”) and of the Catalogue of Encouraged Industries for Foreign Investment (hereinafter referred to as “Encouraged Catalogue”). All three regulations have entered into effect on the 30th of July 2019. The sectors which newly opened up for foreign investment under two Negative Lists and Encouraged Catalogue are summarized in the fact sheet below.