China: China’s New 2011 Catalogue Of Industries For Guiding Foreign Investment: Implications For Foreign Direct Investment In China


Recent changes in China's legal regime will make it easier for foreign investors to access China's markets. The starting point for any foreign investor interested in participating in the Chinese market is the Catalogue of Industries Guiding Foreign Investment (the "Catalogue"). The Catalogue provides the underlying legal basis for all foreign investment in China, and regulates the scope of foreign investment in different sectors of the Chinese economy. The Catalogue is jointly promulgated by the National Development and Reform Commission ("NDRC") and the Ministry of Commerce ("MOFCOM"), China's governing bodies on economic development and trade and investment policy, respectively.

Successive editions of the Catalogue are issued by China as policies towards foreign investment evolve. Foreign investors need to be aware of the changes contained in a new Catalogue when making their investment decisions. The preceding Catalogue was issued in 2007, and on December 24, 2011, a new Catalogue (the "2011 Catalogue") was introduced, effective January 30, 2012.1 Compared to the 2007 Catalogue, the 2011 Catalogue provides foreign investors with access to additional markets within a wider range of industries, and features an emphasis on advanced technology, new energy resources, and professional services.2

Categories of Investment

In the Catalogue, industries in China are divided into four categories with respect to foreign investment: (1) encouraged, (2) permitted, (3) restricted, and (4) prohibited. The contents of the "encouraged," "restricted," and "prohibited" sectors are all explicitly defined, and any remaining undefined industrial sectors fall automatically into the "permitted" category. Industries in "encouraged" and "permitted" categories enjoy simplified approval procedures and favorable tax treatment, while "restricted" and "prohibited" industries are subject to more onerous approval requirements and a higher level of government scrutiny.

It should be noted that the Catalogue may limit the types of investment vehicles a foreign investor can use in certain industries, even for those that are "encouraged." For example, although two industries may both be categorized as "encouraged," one may only permit foreign investment through a joint venture, while the other may allow foreign investment through other means such as the creation of a wholly foreign-owned enterprise.

New Categories of "Encouraged" Industries

Service Industries:

Reflecting the Chinese government's growing desire to broaden its economic focus beyond the traditional emphasis on heavy industry, the 2011 Catalogue dramatically increases the number of service industries found in the "encouraged" category. New service industries added include venture capital enterprises, intellectual property services, electric vehicle charging stations, and vocational education and training, among others.

New Technology or Technologically-Advanced Products in Traditional Industries:

The 2011 Catalogue encourages investment in emerging industries such as information technology, high technology equipment, new materials, and new energy resources. For example, manufacturing key parts for new-energy automobiles is now "encouraged." Investments in recycling technology for electrical products, electromechanical equipment, and batteries are also "encouraged." The exploration and exploitation of new energy resources like shale gas is now "encouraged," provided that the foreign investor forms a joint venture with Chinese partners.

China also seeks increased foreign investment in technology research and development industries in order spur innovation in traditional heavy industries such as textiles, chemicals, and machine manufacturing. For example, while the 2007 Catalogue only permitted foreign investment in manufacturing "new energy" power generation equipment if the foreign investor formed a joint venture with a Chinese company, the 2011 Catalogue has removed that restriction, allowing investors additional flexibility in structuring their investments.

New Categories of "Permitted" Industries

Foreign investment in the manufacturing of a whole automobile has been downgraded from "encouraged" to "permitted" in response to potential overcapacity and concern over "blind investment" in the domestic market. Manufacturing of polycrystalline silicon and the chemical processing of coal have also been downgraded from "encouraged" to "permitted".

By contrast, foreign investment in financial leasing companies and medical institutions has been upgraded from "restricted" to "permitted."

New Categories of "Prohibited" Industries

The construction of "villas" is now classified as "prohibited" in order to reduce speculation in the real estate market. Postal service and parcel delivery service in China are now also in the "prohibited" category.


Overall, the 2011 Catalogue provides foreign investors with increased access to markets in China. The Catalogue reflects China's desire to spur more development in environmentally friendly industries, the high technology industry, and the professional services industry. Foreign direct investors should be aware of these changes when making their investment decisions.


1. Waishang Touzi Chanye Zhidao Mulu (外商投资产业指导目录) [Catalogue of Industries for Guiding Foreign Investment] (promulgated by Nat'l Dev. & Reform Comm'n and Ministry of Commerce, Dec. 24, 2011, effective Jan. 30 2012) (Westlaw) (China).

2. The 2011 Catalogue also provides an opportunity for companies operating within previously restricted industries to restructure their corporate form in China. Previously, companies that wished to operate in a restricted industry may have utilized a Variable Interest Entity ("VIE") structure to enable their investment. These companies are now encouraged to switch to a different corporate structure that will allow them to exercise greater direct control over their operations in China.

Under the VIE structure, Chinese founders would establish a domestic company for the purposes of obtaining a license that otherwise would not be available to foreign investors. A series of contracts were then needed for a wholly foreign owned enterprise to control the domestic company. Without restrictions, foreign investors can simply establish a wholly foreign owned enterprise without the need to contract with a domestic company.

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)
Related Video
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.