China: China Issues New Policies To Attract Foreign Investments

Making use of foreign investment has long been recognized by the Chinese government as an important part of China's fundamental national policy of opening-up and economic reform, which has played a positive role in developing China's economy, and deepening reforms. China's economy is deeply integrated into the world economy, and the country is facing new challenges and opportunities in the form of foreign investment and maintaining a positive balance of its foreign capital reserves. These challenges are compounded by new trends in global trans-national investment and industrial transfer, as demonstrated by the relocation of some labor-intensive manufacturing plants from China to neighboring Southeastern Asia countries and the US home-manufacturing campaign advocated by the new Trump Administration. A further consideration must be China's "new normal" in economic development, characterized by mid-to-high economic growth rates and a shift from production and investment to service, consumption and innovation.

With a view to creating a favorable business and regulatory environment to attract foreign investment, the Chinese central government has recently launched a series of new policies and initiatives.

China's State Council's Circular No. 5

On January 12, 2017, China's State Council released the "Notice of the State Council on Several Measures for Opening Wider to the Outside World and Making Active Use of Foreign Investment" (Circular No. 5), proposing 20 initiatives intended to revitalize the use of foreign capital, create an excellent business environment and optimize government services. These measures include:

  • Revising the "Catalogue for the Guidance of Foreign Investment Industries" and relevant policies and regulations as well as lifting restrictions on foreign investment in the service industry, manufacturing industry, mining industry and other sectors;
  • Revising the current "Catalogue of Priority Industries for Foreign Investments" in the Midwest region by expanding the scope of encouraged industries in the Midwest and Northeast regions;
  • Enhancing IP protections for foreign invested enterprises in China and offering national treatment to foreign invested enterprises in government procurement projects;
  • Allowing local government to specify incentive policies to attract investors and prioritizing substantial land use by offering discounted land premiums to foreign investors;
  • Promoting the full adoption of the model of pre-entry national treatment plus negative list approach in foreign investment management, and simplifying the procedures for both the establishment of foreign invested enterprises and managing foreign investment projects.

Proposed Revisions to the 2015 Foreign Investment Industry Guidance Catalogue (National FDI Catalogue)

In December 2016, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOC) requested public comments on the "Amendment Draft of Catalogue of Industries for Guiding Foreign Investment" (Draft Amendment). According to the Draft Amendment, the number of restricted industries for foreign investment was reduced from 93 to 62, but some industries such as the financial services industry remain tightly regulated. Circular No. 5 affirms the relaxation of the restrictions as reflected in the Draft Amendments and calls for further liberalization of certain restrictive industries, including:

  • Relaxing restrictions on the market entry of foreign investment in banking, financial institutions, securities companies, securities investment fund management companies, futures companies, insurance institutions and insurance intermediaries;
  • Relaxing previous restrictions for foreign investment in oil shale, oil sands, shale gas and other fields of unconventional oil and gas as well as mineral resources;
  • Liberalizing restrictions on the market entry of foreign investment in accounting and audit, architectural design, rating services and other related fields;
  • Promoting the orderly opening-up of telecommunications, culture, education, transportation and other related fields;
  • Eliminating restrictions on the market entry of foreign investment in the manufacturing of rail transport equipment, motorcycle manufacturing, fuel ethanol production, oil and fat processing and other fields;
  • Encouraging investment in high-end manufacturing, smart manufacturing, and green manufacturing as well as production-oriented services such as industrial design and innovation, engineering consulting, modern logistics, inspection, testing and certification related to the "Made in China 2025 Strategy";
  • Supporting foreign investors to participate in infrastructure construction, including projects of energy, transportation, water conservancy, environmental protection, municipal public works, etc., by way of concession operations. Providing concessions to foreign investors to encourage large-scale infrastructure construction projects within the energy, transportation, water conservation and environmental protection.
  • Supporting foreign investment in research and development centers, enterprise technology centers, post-doctoral research stations.

On June 28, 2017, MOC and NDRC jointly released "Catalogue of Industries for Guiding Foreign Investment (2017 Catalogue) which will become effective on July 28, 2017. The 2017 Catalogue makes minor changes to the Draft Amendment and officially confirms the liberalizations as called for by the Circular No.5.

Catalogue of Priority Industries for Foreign Investment in the Central and Western Region (CWR FDI Catalogue)

On February 20, 2017, the NDRC and MOC jointly released the revised "Catalogue of Priority Industries for Foreign Investments in the Central and Western Region" (2017 CWR FDI Catalogue), which came into effect on March 20, 2017.

The 2017 CWR FDI Catalogue added 173 new industrial priorities, expanding the list to a total of 639priorities. In addition, it removed 34 items and modified 84 items from the previous 2013 version of the CWR FDI Catalogue. The major changes in the 2017 CWR FDI Catalogue include the following:

  • Supporting the integrated development of electronics and pharmaceuticals in some provinces, by prioritizing glass substrate, integrated circuit manufacturing, smart phones, tablet computers, and bio-pharmaceuticals;
  • Encouraging agricultural innovation and enhancing the modernization of agricultural operations, e.g., the processing of organic food in Heilongjiang Province or developing standardized vegetable bases in the Inner Mongolia Autonomous Region;
  • Prioritizing engineering reconnaissance, graphic design and logistics in certain provinces to promote services industries. In addition, refining and upgrading the consumer services industry, by prioritizing tourism and leisure, culture and sports in certain provinces;
  • Prioritizing the development of urban parking facilities, electronic car charging facilities and road freight station facilities to promote the development of transportation and logistics networks;
  • Prioritizing export-oriented textile, clothing, and furniture businesses to promote new export-oriented industrial clusters in provinces with labor advantages.

Unlike the National FDI Catalogue which categorizes foreign investments as either "encouraged" projects which will receive tax incentives, and "restricted" and "prohibited" projects which will not, the foreign investment priorities listed in the CWR FDI Catalogue are all eligible for applicable preferential policies, as long as these foreign investments are carried out in the prescribed areas.

Special Management Measures for the Market Entry of Foreign Investment in Pilot Free Trade Zones (Negative List)-2017 Version

On June 5, 2017, China's State Council's office published the Special Administrative Measures (Negative List) on Foreign Investment Access to the Pilot Free Trade Zones (the 2017 Negative List). Compared with the previous version released in April 2015 (the 2015 Negative List), the 2017 Negative List, which will come into effect on July 10, 2017, significantly reduces the range of industries and activities in which foreign investment is either restricted or prohibited in China's Pilot Free Trade Zones (FTZs).

The "negative list" is an innovative approach recently adopted by the Chinese government to attracting foreign investment in the FTZs, an important step towards opening the Chinese market to foreign investment. Under the negative list approach, if an industry or activity is not explicitly restricted or prohibited by its inclusion in the negative list, foreign investors may freely invest in said industry and receive national treatment in the same manner as Chinese investors.

When the negative list was first introduced for China's first FTZ in Shanghai in 2013, the number of listed restricted industries and activities disappointed many foreign investors. The long Negative List was reduced from 190 to 139 in 2014, and further reduced to 122 by the 2015 Negative List. The 2017 Negative List makes further significant cuts and the total restricted industries listed are reduced to 95.

Restrictions removed from the list mainly pertain to the manufacturing and service sectors. For example, the 2017 Negative List removed previous requirements that electronic automobile manufacturers must use their own trademarks and possess their own intellectual properties, licensed inventions, and patents; and that manufacturing of rail transportation equipment should be confined to equity joint ventures or contractual joint venture cooperation. In the service sectors, the minimum operational requirements for foreign invested banks to engage in RMB services have also been removed.

A complete list of the 2017 Negative List may be obtained here (in Chinese). It is also expected that the current negative list approach being tested in the FTZs may eventually be applied across the entire country.

Conclusion

In a nutshell, the Circular No. 5, the 2017 Catalogue, the 2017 CWR FDI Catalogue and the 2017 Negative List indicate China's determination to further build an investment-friendly environment for foreign investors so as to enhance its ability to compete in the global arena. It is also expected that a series of supporting documents and measures will be developed and introduced in the near future.

China Issues New Policies To Attract Foreign Investments

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
 
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”

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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (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 www.mondaq.com

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 Mondaq.com’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.

Disclaimer

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.

Registration

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 unsubscribe@mondaq.com 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.

Cookies

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.

Links

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.

Mail-A-Friend

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.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

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 webmaster@mondaq.com.

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 EditorialAdvisor@mondaq.com.

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 enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.