The total foreign investment
into China for the first 9 months of 2007 amounted to about
US$47 billion, an increase of 10.9% from 2006.
In an attempt to cool down
soaring house prices, clean up the environment and diverting
foreign investments towards new industries, the China's
National Development and Reform Commission ("NDRC")
and Ministry of Commerce jointly announced the issue of a
revised Guidance Catalogue for Foreign Investment (Revised
2007) ("the 2007 Catalogue") on 31 October 2007. The
2007 Catalogue because effective on 1 December 2007 and the old
catalogue promulgated in 2004 ("the 2004 Catalogue")
will be repealed.
According to NDRC, the rationale
of the 2007 Catalogue are as follows :-
foreign investment with large consumption of energy and
raw materials, high level of pollution will be further
controlled and those that are environment friendly will be
adjusting the past practice of encouraging pure export to
enlarge the fiscal deficits and expand foreign reserves;
encouraging investment with high technology techniques
and equipment manufacturing and new raw materials; and
no more items specifically tailored for provinces in the
middle or western area.
Major Changes under the
Real estate secondary market
transaction, real estate brokerage and real estate agency are
new items under the Restricted category, in addition to the
development of land and construction and operation of luxury
hotels, villas and high-class offices and international
Development of residential
property in the 2004 Catalogue has been completely taken out
from the Encouraged category and is now permitted.
The construction and operation
of golf courses previously Restricted is also now placed in the
2. Services, retail and
Two new items of foreign
investment, namely modern logistics and outsourcing services,
are added in the Encouraged Industry. Outsourcing services are
elaborated in the 2007 Catalogue as "engaging in
management and maintenance of application system; support and
management of information techniques; support center of bank;
financial settlement; human resource services; call center;
data handling and outsourcing of information techniques and
Advertisement companies and
freight forwarding companies are now reclassified as Permitted
and no longer under the Restricted category. Credit rating and
ranking companies are now placed under the Restricted
Foreign investment solely
devoted to the export of products is no longer grouped under
the Encouraged category in the 2007 Catalogue as a result of
mounting trade deficits between China and other countries.
3. Entertainment and
Foreign investment in the
operation of sports centres, fitness centres and sports,
competition, training and agency services are now expressly
listed under the Encouraged category.
Operation of performing venues
is added to the Encouraged category with the requirement of
Chinese party holding at least the majority shareholding.
However, operation of performing arts agency is now placed
under the Restricted category. Similarly, operation of
entertainment premises is now placed under the Restricted
category and must be operated in the form of contractual or
equity joint venture.
The operation of news websites,
online audio-visual programmes and internet online service
centres and internet cultural operations are listed under the
5. Specialist equipment
relating to environmental protection
Equipment for the manufacturing
of solar cells, development and manufacturing of equipment for
prevention of pollution; manufacturing of equipment for the
handling garbage in city and organic usage of garbage in
village; equipment for recycling of scrap plastic, electrical
appliances, rubber and handling of worn battery, and equipment
for re-using of the scrap tyres are listed under the Encouraged
Investors in Hong Kong and Macau
shall also consult the Mainland and Hong Kong Closer Economic
Partnership Arrangement ("CEPA") from time to time
for any special preferential treatment for Hong Kong or Macau
If you have any question about
the above 2007 Catalogue or foreign direct investments in
Mainland China, experienced lawyers in our China Business
Department will be happy to assist you.
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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