China's gradual opening up to foreign investment has been a
key factor in the successful development of China's economy.
However, some industrial sectors remain closed to foreign
investment. With the economy maturing and growth slowing (to around
7% in 2015), the further opening of various industrial sectors to
foreign investment is a clear sign of the government's
intention to continue liberalizing the economy and pursuing
far-reaching structural economic reforms.
2015 Foreign Investment Guidance Catalogue
China restricts foreign investment through the Foreign
Investment Guidance Catalogue, which dictates in which sectors
foreign investment is encouraged, restricted (i.e. subject to some
limitations) and prohibited. Foreign investment is permitted in all
sectors not listed in the catalogue.
In November 2014 a revised draft of the Foreign Investment
Guidance Catalogue (last published in 2011) was issued, and a final
version was adopted in March 2015. The 2015 Foreign Investment
Guidance Catalogue that became effective on 10 April 2015 has more
than halved the number of restricted industry sectors from 79 to
38, while the number of prohibited sectors has been reduced from 38
Sectors added to the encouraged category including:
accounting and auditing (previous limited to cooperation or
partnership, the only restriction is that the chief partner must
hold the Chinese nationality);
senior care institutions (a sector that is receiving a lot of
encouragement from the Chinese government generally; for example,
the MOFCOM and the Ministry of Civil Affairs recently issued a
circular to encourage foreign investment in such
Sectors that have been removed from the restricted category
various manufacturing sectors, including manufacturing of
medicines, certain chemicals (e.g. calcined-soda) and general
apparatus (e.g. various types of P0-grade bearings and their
e-commerce for technology, media and telecommunication business
development of tracts of land, construction and operation of
high-class hotels, high-class office buildings and international
exhibition centers, investment in real estate secondary market and
real estate brokerage
trust companies, and currency brokerage companies (restrictions
on foreign-invested banks remain).
Some sectors have also been added to the restricted
category. Foreign investment in hospitals for example has been
moved from the permitted to the restricted category, and is now
subject to co-investment with Chinese investors (i.e. joint
ventures with Chinese parties only); while the manufacture of
complete automobiles has also been moved to the restricted category
(signifying the government's intention to support local car
The prohibited category has remained largely untouched. This
means, for example, that the establishment of foreign law firms
hiring Chinese-licensed attorneys and practicing Chinese law
remains strictly prohibited (despite relaxation of the rules in the
Shanghai Free Trade Zone last year).
Liberalizing the Chinese Economy
Some industries are receiving specific protection – a
message that the Chinese government will not hesitate to use its
powers to give local industries the chance to develop
independently, if this is regarded in the interest of China's
More generally though, the 2015 Foreign Investment Guidance
Catalogue brings opportunities for a lot of different sectors. For
foreign investors that are operating in "hot" sectors
such as senior-care and e-commerce this is official confirmation
that their investments are welcome. The lifting of some of the
rules for foreign-investment in accounting and auditing, trust work
and currency brokerage may encourage foreign investors to further
expand in China and contribute their much-needed expertise. And by
removing investment in high-class hotels, office buildings and
international exhibition centers, the Chinese government may be
hoping to give these sectors a further boost.
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.
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