China: New Policies For Inbound Investment

Last Updated: 10 August 2017
Article by Pan Xiaodong, Rose Zhou, Li Zhaoxia, Wilfred Chiu and Roy Zhang

The < Catalogue for the Guidance of Foreign Investment Industries > (hereafter referred to as "The Catalogue"), being as the crucial industrial guidance for foreign investments in China, has been amended in accordance with the needs of economic development and the open-up since its first promulgation in year 1995. On June 18, 2017, the National Development and Reform Committee and the Ministry of Commerce of China promulgated < Catalogue for the Guidance of Foreign Investment Industries (Amended in 2007) >, which is the 7th amendment of the Catalogue and reflects further release the admission of foreign investments in the service, production and mining industries. The amended Catalogue has nationally copied the open-up measures implemented in the pilot free trade zones based on the experience gained from the launch of the pilot free trade zones. The new Catalogu shall be executed from July 28, 2017.

The major changes of the Catalogue (Amended in 2017)

Comparing to the Catalogue amended in 2015, this version includes two major amendments.

I.Further widen the coverage of the open-up

The new Catalogue further decreases the restrictive measures and enhances the coverage for foreign investments. The new Catalogue includes 63 restrictive measures (including 35 restrictive industries and 28 prohibited industries), which reflects the reduction of 30 restrictive industries comparing to the Catalogue amended in 2015.

Simultaneously, the encouraged industries are almost kept unchanged by continuously encouraging foreign capital to invest in the advanced production, high-tech, energy saving and environmental protection, modern service and etc.

In addition, the new Catalogue further enhances the open-up in certain industries including service, production and mining. In terms of the service industry, the restrictive measures have been removed for the industries of highway passenger transportation, ocean shipping, credit information and grading service, accounting and auditing, resale of agricultural goods and etc. For the production industry, the amendments of the new Catalogue including removing the restrictive measures for the industries of production of railway traffic equipment, automotive electronics, batteries for new energy vehicles, motorcycle, edible oil and fat, fuel ethanol and etc, as well as relaxing the restrictive measures for the production of non-hybrid electric vehicles. In terms of the mining industry, the restrictive measures have been removed for certain industries including unconventional oil and gas, precious metal, and lithium mineral. In addition, the new Catalogue has increased the programs that are in line with the direction of streamlizing industrial restructuring into the encouraged category, which include foods for special medical purpose, equipment for visual reality or augmented reality, key components for 3D printing equipment, urban parking facilities and etc.

II.Introduction of the negative list for foreign investments

The new catalogue has been restructured by introducing the special administrative measures for foreign investments (the negative list for the entry of foreign investments).

Based on the reform requests in terms of the administration model of negative list for foreign investments, the new Catalogue has generated the negative list that includes the items with shareholding restrictions in the encouraged industries and the items in the restricted and prohibited industries which were included in the previous versions of the Catalogue. The negative list is used to back up the administration model of national treatment and negative list for foreign investments, which in principle shall not enforce any restrictive measure on foreign investments and shall allow the foreign invested projects beyond the negative list to follow the registration procedures.

In addition, in accordance with the nature of the administration model of negative list for the entry of foreign investments, the new Catalogue no longer includes the restrictive measures that are applicable to both domestic and foreign investments. For instance, the constructions of large theme park invested by domestic or foreign capitals shall be both subject to the approval procedures, the new construction projects of golf courses and villas as well as the gaming industry and the pornography industry are prohibited for both domestic and foreign investments.

The China Pilot Free Trade Zones and its Special Administrative Measures (Negative List)

In order to build a competitive international commercial environment that is attractive to both domestic and foreign investments and conforms to international practices, the National Congress has approved the establishment of Shanghai Pilot Free Trade Zones on September 27, 2013, the square of which has been further enlarged on April 20, 2015. On the same date, the establishment of other three Pilot Free Trade Zones in the Guangzhou city, Fujian province and the Tianjin city was also approved by the National Congress. On March 31, 2017, the National Congress has further approved the establishment of other 7 Pilot Free Trade Zones which are located in the province of Liaoning, Zhejiang, Henan, Hubei, Chongqing (city), Sichuan and Xiaanxi. With this China now has 11 Free Trade Zones and occupies over 1,300 square kilometers.

At the same time that the establishment of the Pilot Free Trade Zones in Guangzhou, Tianjin and Fujian was approved on April 20, 2015, the National Congress also promulgated the The Special Administrative Measures of the Pilot Free Trade Zone for Admittance of Foreign Investments (Negative List) (thereafter referred to as "Negative List for FTZs"), which lists out the industries in the Pilot Free Trade Zon s in Shanghai, Guangzhou, Tianjin and Fujian that are subject to the special administrative measures and that the national treatment shall not be applied for foreign investments. The foreign investments in the industries within the negative list shall be subject to the permission procedures, and the domestic and foreign investments in other industries shall be subject to the equal administration measures.

With the aim to further enlarge the admittance of foreign investments in the Pilot Free Trade Zones and to launch a new round of the open-up, the National Congress promulgated The Special Administrative Measures of the Pilot Free Trade Zone for Admittance of Foreign Investments (Negative List) (Amended in 2017) , which has been executed in the 11 Pilot Free Trade Zones since July 10, 2017.

Comparing to the version of 2015, the new Negative List for FTZs decreases 10 industries and 27 special administrative measures, and enlarges the open-up in certain industries such as production of aviation and automotive, and financial industries including banking and insurance. The number of items included in the Negative List has been decreased to less than 100.

Free Trade Agreement

The Free Trade Agreement usually refers to the deal signed by more two countries or territories, aiming to further open up markets to each other based on the WTO most-favoured national treatment, to remove the tariff and non- tariff walls for most goods, to improve market access conditions, open-up for investments, enhance free flow of the factors of productions including goods, service, capital, technology and people, to realize freedom of trading and investing, and to realize advantage complement and mutual development.

Till now, China has entered into 15 Free Trade Agreements that involves 23 countries and territories including Hong Kong and Macau. In addition, the Chinese government has been negotiating with many other countries and territories for signing new Agreements and upgrading the existing Agreements, as well as carrying out the feasibility study for signing new Agreements.

The increased number of the Free Trade Agreements reflects the further open- up of China markets to more and more foreign nations and territories, as well as decrease of the operation costs.

Grant Thornton opinion

The current pattern of the world economy has been changed, the global multinational investment appears new characteristics, utilization of foreign capital in China is facing a new situation. By centrally focusing on the changing situation both at home and abroad, the Chinese government has carried out a series of policies and measures including adhering to the open-up and development, actively expanding the open-up, further relaxing foreign access to the service, manufacturing and mining industries, continuing to encourage foreign investments in the fields conforming to direction of the national industrial structure adjustment and optimization, adopting the internationally adopted administrative measures of national treatment and negative list to foreign investments.

These measures are undoubtedly good news for foreign investment in China.

The new policy will also bring the change and uncertainty in terms of implementation. Therefore, we would like to remind that before coming to China to invest, foreign companies shall understand the investment policies in China, industry guidance catalogue and other relevant laws and regulations, and shall carry out professional plannings in advance according to their own characteristics, reasonable use of the existing policy to enjoy the biggest benefits, so as to improve the capital efficiency. At the same time, compliance requirements in China shall be obtained to reduce the incompliance risks.

Since the reform and open-up in China, Grant Thornton China has been providing commercial services for many foreign invested enterprises, and has gained fruitful professional knowledge and practical experiences. We hope to obtain more opportunities to contribute our knowledge and experience for foreign investments in China. Let's grow and develop together!

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.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
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”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions