China: China Amends Foreign Investment Policy: New Foreign Investment Industry Guidance Catalogue

Originally published V&E China Practice Update E-communication, January 13, 2012

On December 24, 2011, China's National Development and Reform Commission (NDRC) and Ministry of Commerce (MOC) jointly issued a new, revised version of its Foreign Investment Industries Guidance Catalogue (the "Catalogue"). The Catalogue will become effective January 30, 2012, and will replace the existing version of the guidance catalogue promulgated in late 2007.


China first published the Catalogue in 1995 in order to regulate the inflow of foreign investment in a manner consistent with the central government's economic development objectives. Over the years, the Catalogue has subsequently been revised several times to conform with China's commitments under its Protocol of Accession to the World Trade Organization (WTO) and to reflect China's continued economic and social development. The latest amendments to the Catalogue reflect China's current emphasis on improving the quality of foreign investment to promote the development of high and new technology, valued-added manufacturing, efficient use of resources, and environmental sustainability.

The Catalogue classifies foreign direct investments in the various Chinese industry sectors as "encouraged," "restricted," "permitted," or "prohibited," and sets out specific industries in which foreign investment is either "encouraged," "restricted," or "prohibited." Activities not listed are, in the absence of other rules to the contrary, considered to be "permitted" for foreign investments. Foreign investment in "encouraged" industries may enjoy certain tax benefits and is often subject to less strict administrative requirements from approval authorities. The "restricted" category includes industries into which foreign investment is subject to a higher level of scrutiny, stricter administrative requirements, and may be denied at the discretion of the approval authorities. Foreign investment is not permitted in industries categorized as "prohibited."

Continued Decentralization of Approval Authority

The Chinese government approvals required for foreign investment in a particular industry will depend on the category into which that industry falls. In general, local government authorities have greater discretion to approve foreign investment in industries that are in the "encouraged" or "permitted" category, while investments in "restricted" industries may require review and approval of central government authorities.

In spring 2011, in anticipation of the new Catalogue, the State Council had issued regulations giving local authorities greater scope to approve foreign investments, by lifting the threshold for requiring central authority approval of investments in the "encouraged" or "permitted" categories from US$100 million to US$300 million.

We set forth in a table below the current foreign investment approval regime:

Encouraged Industries

Permitted Industries

(implied category)

Restricted Industries

Central Government Approval

Equal to or more than US$300 million

Equal to or more than US$300 million

Equal to or more than US$50 million

Local Government Approval

Less than US$300 million


Note however that encouraged industries typically only require local governmental authorities' approval even for project valued at more than US$300 million.

Less than US$300 million

Less than US$50 million

Please also note that the Catalogue specifies that investments in certain industry sectors need to be structured as joint ventures with Chinese partners (rather than wholly-foreign owned) and in some cases, a Chinese partner is required to hold a majority ownership interest. Therefore, any potential in-bound investor should consult the Catalogue in order to determine in which category the contemplated investment falls and properly structure their investments.

Major Amendments in the New Catalogue

Select major amendments in the new Catalogue are set forth below:

I. Exploration of Select Rare Earth Elements and Radioactive Minerals Prohibited

The Mining sector spans across the "encouraged," "restricted," and "prohibited" categories depending on the type of energy and natural resources in question. The mining and beneficiation (a process whereby extracted ore is separated into mineral and gangue) of iron ore and manganese ore continue to fall under the "encouraged" category. The new Catalogue further explicitly prohibits foreign investments for the exploitation and exploration of high-alumina refractory clay, wollastonite, lithium ore, pyrite ore, and refining of the salt lake brine resources, and a selection of radioactive minerals.

We will further discuss the important changes in the regulation of the oil and gas industry below.

II. Foreign Investors Encouraged to Invest in China's Emerging Shale Gas Industry

The traditional oil and gas industry has largely been unaffected by the revisions in the new Catalogue, which continues to provide that investments in risk exploration, development, and production of petroleum and natural gas, as well as investments relating to new technologies for petroleum, are encouraged in the form of cooperation with Chinese partners (either through equity joint ventures or cooperative joint ventures). The new Catalogue adds that foreign investments to explore and develop unconventional natural gas resources such as shale gas and seabed-level gas hydrates through joint ventures with Chinese partners are encouraged.

According to a 2011 report published by the U.S. Energy Information Administration, China has a tremendous amount of exploitable shale gas, yet the country is in the early stages of developing these natural resources. Relaxation on foreign investments in shale gas introduced in the new Catalogue will open doors for international energy companies that have been seeking opportunities to participate in shale gas development in China. As this client e-communication goes to press, China's Ministry of Land and Resources has officially changed the legal status of shale gas to "independent mining resources," thus allowing for the first time smaller private firms to join in oil and gas exploration in China. We are working on a separate client e-communication covering this topic.

Please note, however, ambiguities remain as to whether a foreign energy company can hold a majority participating interest, and/or act as operator in the exploitation and development of shale gas blocks.

III. More Service Industries Open to Foreign Investors

In addition to the energy and natural resources industry updates mentioned above, changes in the new Catalogue also span across many other industries. For example, nine service industries such as venture capital enterprises, intellectual property services, marine petroleum cleaning technology services, home services, logistics consultancy services, vocational skill training, and motor vehicle charging stations have been promoted to the "encouraged" category in the new Catalogue. In addition, foreign investments in health care, financial leasing companies, and commercial companies engaging in franchise or commission business or business management have been upgraded from the "restricted" category to the "permitted" category. Note, however, that foreign investments in financial companies (except for the financial leasing companies) such as banks, securities companies, and trust companies remain in the "restricted" category.

IV. Environmentally Friendly and High-Tech Manufacturing Encouraged

The changes in the new Catalogue continue to reflect China's goal to encourage foreign investments in environmentally friendly industries and high-technology and value-added industries. For example, the new Catalogue encourages foreign investments in the (i) manufacturing of key components and parts for new energy or fuel-efficient automotives (though foreign investment in energy-powered battery is capped at 50 percent), (ii) manufacturing of high-technology equipment for large construction projects, electricity generation, and waste treatment, and (iii) research and development of automotive components and environmentally protective aerospace materials. Foreign investments in the manufacturing of complete automobiles, however, are downgraded from the "encouraged" category to the "permitted" category (foreign investment remains capped at 50 percent).

V. Prohibition on Luxury Real Estate Projects

The rapid development of the Chinese real estate industry in this decade has led the Chinese government to introduce restrictions in order to "cool down" the real estate market. The new Catalogue continues this policy trend by downgrading foreign investments in the construction of high-end villas from the "restricted" category to the "prohibited" category.

VI. Go West Policy

In addition to the Catalogue, China has promulgated specific catalogues since 2000 steering foreign investment capital to China's less-developed central and western regions by providing more favorable treatment for foreign investments focused on those regions. We understand from the Q&A published in connection with the new Catalogue that the current 2008 Catalogue of Priority Industries for Foreign Investment in the Central and Western Regions will be further revised to redeploy certain foreign capital to the central and western regions. In particular, foreign investments in the environmentally friendly and labor-intensive industries are likely to be encouraged.


The new Catalogue will impact all new foreign investments into China over the next few years. Generally speaking, the notable changes in the new Catalogue are consistent with the principles outlined in China's 12th Five-Year Plan (covering 2011 – 2015) that China will further restrict industries with heavy pollution and consumption of energy resources or running-over capacity, but encourage foreign investments in industries such as high technology, modern services, new energy, energy-saving, and environmental protection.

It is important to note, however, that the Catalogue is drafted with both specific details and many ambiguities (e.g., ownership percentages allowed, the interplay between the central and local government authorities). Further guidance and detailed analysis will be required as a matter of practice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.