The most recent version of the Guidance Catalogue for
Foreign Investment Industries (the Catalogue) came into effect
on 1 December 2007. Foreign investors in China are required to
comply with the restriction on shareholding interest in
different industries, as outlined in the Catalogue.
The new Catalogue aims to direct foreign capital towards
helping China upgrade its industrial structure and improve
unsound aspects of its economic growth. A key area of focus of
the new Catalogue is resource conservation and environmental
In particular, it reflects the Chinese Government's
eliminate "backward" production techniques and
realise energy-saving and emissions reduction
synchronise foreign investment with improvements to
China's domestic industrial structure
encourage foreign investment in recycling, clean
production techniques, renewable energies and environmental
The new Catalogue also aims to strictly limit market access
to heavy-polluting industries that involve high energy
Foreign investment is no longer encouraged in projects
involving important and scarce mineral resources or
non-renewable energy production, such as the mining and sifting
of low-grade metallurgical ores.
The production and supply of electricity, gas and water is
now off-limits to foreign investors.
Exploration for, and mining of, tungsten, tin, antimony,
molybdenum, fluorspar, and the smelting of electrolytic
aluminium, copper, lead, zinc, tungsten, molybdenum, stannum
(stannum compound excluded), antimony (including antimony
oxide, sulfurated antimony) and other rare metals have been
removed from the "restricted" category and placed in
the "prohibited" category.
In respect of small-scale power grids in Tibet, Xinjiang and
Hainan the construction and operation of condensing steam
coal-fired power stations with a single unit capacity of
300,000 kW or less and coal-fired heat and electricity
cogeneration power stations with extracting and condensing
steam turbine units, of which the single unit capacity is
100,000 kW or less, was previously "permitted" but is
With the exception of small-scale power grids in Tibet,
Xinjiang and Hainan, such construction and operational
activities are now "prohibited" (they were previously
The utilisation of mine gas; the development of new
technology for increasing the utilisation rate of mine gangue
and the application of technology for recovering mine ecology;
the exploration for, and exploitation of, non-conventional oil
resources, such as oil shale, oil sand, heavy oils and extra
heavy oils, were all previously "permitted", are now
explicitly "encouraged". However in most cases
foreign investment must take the form of a joint venture with a
Apart from the Catalogue, in the near future the Chinese
Government is expected to set and apply standards for energy
consumption, environmental protection and safety, resource
recovery and quality control in respect of applicable
technologies and project construction.
Andrew Halper, Head of the China Business Group at Eversheds
commented on the changes to the Catalogue: "This is a
typically macroeconomic move by the Chinese Government,
designed to accelerate the development of efficient usage of
energy resources in China."
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 Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
We have set out some examples of how the MERCP Act impacts resource exploration and production, and what you need to do.
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”
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).