Hong Kong: The 6th Revision Of The Foreign Direct Investment Industries Guidance Catalogue

On 13 March 2015, the PRC Ministry of Commerce ("MOFCOM") and National Development and Reform Committee ("NDRC") released the 6th revision of the Foreign Direct Investment Industries Guidance Catalogue ("2015 Catalogue") 1. It is welcomed by most of the foreign investors as the 2015 Catalogue echoes the market expectations for greater openness and liberalization through lifting many restrictions on foreign investment in various industry sectors.

In this tax flash, we highlight some of the notable changes in the 2015 Catalogue as well as the development of a new Foreign Investment Law.


Foreign Direct Investment Industries Guidance Catalogue ("Investment Catalogue") was first published in 1995. It divides foreign investment into four categories: "Encouraged"2; "Restricted"3 and "Prohibited"4 (industry sectors not listed in the Investment Catalogue are deemed to be "Permitted"). It also stipulates the rules on foreign ownership restrictions and the allowable corporate forms that foreign investment can be invested. During the past 20 years, several revisions have been made to reflect the change of the Central government's economic and industry development policies.

Compared to the 5th revision, the number of "Encouraged" sectors in the 2015 Catalogue has been slightly increased to 349, whilst the "Restricted" sectors sharply reduced from 79 to 38 and the "Prohibited" sectors slightly reduced from 38 to 36.

Below are some of the major changes in each categories:


Automobile Manufacturing

  • The requirement of PRC majority shareholding on "Production and R&D of Automobile's Embedded Electronic Integrated System" has been lifted. Foreign investors are now permitted to establish wholly foreign owned enterprises to produce and research on the related products.

Production and Supply of Power, Gas and Water

  • "Construction and Operation of Power Grids" has been moved from the "Restricted" category to the "Encouraged" category. However, such projects still require majority ownership by Chinese partners.

Scientific Research, Technical Services and Geological Prospecting

  • Development and application of "Internet Technologies" is added to the "Encouraged" category. This is in line with the supportive State policy in the new and high technology field.

Communication and Transportation, Storage, Post and Telecommunication Services

  • The requirement of PRC majority shareholding on "Construction and Operation of Urban Subway, Light Railway and other Track Transport" has been lifted. Foreign investors can set up wholly foreign owned enterprises to construct and operate the aforesaid projects.

Leasing and Commercial Service Industry

  • The restriction of joint venture or partnership on "Accounting and Auditing" has been lifted. Foreign investors can set up wholly-owned accounting firms in the PRC5 to provide accounting and auditing related services.


  • "Occupational Training" is added into the "Encouraged" category, reflecting the supportive State policy in this field.

Public Health, Social Security and Social Welfare

  • Further to the Announcement [2014]No.81 "Matters Relating to Foreign Investors' Establishment of For-profit Elderly Care Institutions" issued by the Ministry of Commerce and the Ministry of Civil Affairs on 24 November 2014, "Elderly Care Institutions" is now added into the "Encouraged" category.

Art, Sports and Entertainment Industries

  • The requirement of PRC majority ownership on "Operation of Performance Venues" has been lifted.


Most of the liberalized industries lie in the manufacturing sector (See "Permitted" Category below). Comparing with the 5th revision, the number of sectors requiring Sino-foreign joint venture structure in the 2015 Catalogue was reduced from 43 to 15, and the number of sectors requiring PRC majority ownership decreased from 44 to 35.

Automobile Manufacturing

  • Manufacturing of whole units of automobile, special automobiles (except agricultural vehicles) and motorcycles are classified as "Restricted", reflecting government's support for PRC domestic car manufacturers. PRC ownership in the joint venture enterprises should not be less than 50%. Except for merger of other domestic automobile manufacturing enterprises with PRC joint ventures, the same foreign investor is not allowed to invest in more than two joint venture enterprises manufacturing the same type of motor vehicles.

Transportation, Storage and Postal Services

  • "Value-added and basic telecommunications TMT businesses" is still categorized as "Restricted" and subject to 50 percent or more PRC ownership requirement;

Financial Industries

  • Banks, insurance companies, securities companies, insurance brokers and futures companies are still categorized as "Restricted" and subject to restrictions.


  • "Pre-school Education" and "Tertiary Education" has been added to the "Restricted" category and limited to co-operative joint ventures led by a PRC party.
  • "Upper years of Comprehensive Secondary School Education" is still categorized as "Restricted" and limited to co-operative joint ventures led by a PRC party.

Public Health, Social Security and Social Welfare

  • Although wholly foreign-owned medical institutions are allowed to be set up in the Shanghai Free Trade Zone and seven pilot cities and provinces (Beijing, Tianjin, Shanghai, Jiangsu, Fujian, Guangdong and Hainan), in the 2015 Catalogue, "Medical Institutions" is moved to the "Restricted" category and limited to joint ventures.

Art, Sports and Entertainment Industries

  • The requirement of PRC majority ownership on "Operation of Performance Venues" has been lifted.


New prohibited industries have been added to the list, including the following:

Processing Industry of Petroleum, Coking and Nuclear Fuel

  • "Production of Nuclear Fuel" is added

Wholesale and Retail Trade Industries

  • "Wholesale and Retail of Tobacco" has been moved from "Restricted" category to "Prohibited" category.

Leasing and Commercial Service Industry

  • "Provision of PRC Legal Advice"6 has been moved from "Restricted" category to "Prohibited" category.

Research and Technical Services Industries

  • "Production of world administrative map, national administrative map, administrative map of the provincial level and below, national teaching map, compilation of local teaching map and three-dimensional map; compilation of navigation electronic map; surveys relating to regional geological mapping, mineral geology, physical geography, geochemistry, hydrogeololgy, environmental geology, geological disaster and remote sensing geology" is added.


  • "Compulsory Education" (i.e. primary school and lower years of secondary school) is still categorized as "Prohibited".

Art, Sports and Entertainment Industries

  • "Internet Publishing Services" is added, which is in line with the government's prevailing policies.
  • "Auction Houses and Antique Shops engaging in Antique Auction" is added.
  • Construction of "Golf courses and villas" is still categorized as "Prohibited".


Manufacturing Industries

  • Manufacturing industries such as beverages, chemical raw materials and chemical products, pharmaceutical manufacturing, chemical fibres, general and special equipment (except for "Arms and Ammunition" which is still "Prohibited"), transportation equipment, communications equipment, computers and other electronic equipment are removed from the "Restricted" category Information Technology
  • "E-commerce for Technology, Media and Telecommunications Business" is removed from the "Restricted" category.

Financial Industries

  • "Non-bank Financial Institutions, Trust Companies, and Currency Brokerage Companies" is removed from the "Restricted" category.

Real Estate industries

  • "Real Property Projects" is removed from the "Restricted" category. No more restrictions on foreign investment in land development and construction and operation of high-class hotels, high-class office buildings and international convention and exhibition centres, investment in real estate secondary market and real estate brokerage.

Art, Sports and Entertainment Industries

  • "Operation of Golf Courses" and "Operation of Entertainment Venues" have been removed from the "Prohibited" category.


The 2015 Catalogue reflects the PRC Central government's economic restructuring plans and industrial policies. It offers more liberalization, lifts restrictions and encourages foreign investments in sectors such as advanced manufacturing, modern services, and scientific/technological research and development. The 2015 Catalogue is a welcome change to the PRC existing foreign investment regime.

Currently, the PRC government is also working on a new Foreign Investment Law to replace the existing laws regulating foreign investments in the PRC (i.e. the Sino-Foreign Equity Joint Ventures Law, the Sino-Foreign Cooperative Joint Ventures Law and the Wholly Foreign-Owned Enterprises Law). The new law aims to set forth a more transparent legal framework of guidance for foreign investments in the PRC. A consultation draft ("Consultation Draft") covering topics like market entry, national security review system, contemporaneous and post-registration supervision and administration, foreign investment protection and coordination etc. was issued by the MOFCOM on 19 January 2015.

Some of the key proposed changes under the Consultation Draft include:

  • The granting of "national treatment" to foreign investors: foreign investors can make investments on the same terms as PRC investors;
  • For foreign investment enterprises and projects, a shift from the current "case-by-case pre-approval mechanism" to the "negative list" post-supervision mechanism (i.e. the "special administrative measure list" approach currently adopted by the Shanghai Free Trade Zone).

In the future, unless the foreign investment falls within the "negative list" (which is expected to be issued separately by the State Council) or the investment exceeds certain amount7, foreign investors will be subject to a record filing system (just like the domestic counterparts) instead of the current "case-by-case pre-approval" system. This will largely alleviate the foreign investors' administrative burdens.

  • Introduce the concept of "effective control" for determining whether a project should be classified as foreign investment: the Consultation Draft adopts the "substance over form" approach. In a case where a domestic enterprise established in the PRC is "controlled" by a foreign investor, the domestic enterprise will deem to be a foreign invested enterprise according to the Consultation Draft even if the domestic enterprise is directly owned by Chinese shareholders. "Control" is defined as:
  • the ownership of not less than 50% of the voting rights
  • the right to appoint (or the ability to secure) a majority of the board of directors
  • the ability to otherwise materially influence the decisions of the board or shareholders meeting of a company, or
  • the ability to exercise decisive influence over a company by way of contractual or trust arrangements

If the Consultation Draft is finalized and takes effect without further changes, foreign investors would no longer be able to use Variable Interest Entity ("VIE") structure to bypass the foreign investment restrictions stipulated under the Foreign Direct Investment Industries Guidance Catalogue. Offshore structure set up by PRC citizens which are duly registered with the local State Administration of Foreign Exchange may still use the VIE structure to "control" operating enterprises in China engaged in the "Restricted" or "Prohibited" sector as the ultimate beneficial owners are not "foreign investors". Existing VIE structure used by overseas listed companies or the VIE structures controlled by foreign investors (non-Chinese ultimate beneficial owners) would also be affected. Hopefully, the national treatment principle could apply in the way that "the negative list" would only cover industries/sectors that are prohibited to both foreign and PRC domestic investors.

  • Foreign investment matters that may endanger national security will be subject to national security review. The State Council will organize an inter-departmental commission (sponsored jointly by the NDRC and MOFCOM) to conduct national security reviews of proposed foreign investment projects.
  • Sets forth a standardized information reporting system for foreign investments: According to Article 30 of the Consultation Draft, foreign investors will be required to report basic information to MOFCOM, including: (1) foreign investor identification information; (2) investment project information; (3) foreign-invested enterprise information; and (4) any change in ultimate beneficiary owner.

We will closely monitor the changes of the foreign investment system and the development of the new PRC Foreign Investment Law and keep you posted further development.


1 Chinese version of the 2015 Catalogue: http://www.mofcom.gov.cn/article/b/f/201503/20150300911747.shtml

2 "Encouraged": Foreign investments are welcomed by the PRC government if the sector is under the "Encouraged" category. Investors may enjoy certain benefits such as tax incentive, cheaper land cost, simplified approval procedures etc.

3 "Restricted": Restrictions such as foreign shareholding ratio's, limits on the business scope and special approvals etc. are imposed if the sector is under the "Restricted" category.

4 "Prohibited": No foreign investment is allowed if the sector is under the" Prohibited" category.

5 The chief partner must be a PRC national.

6 Except for providing information about the impact of PRC legal environment

7 if the underlying business falls within the "negative list" or the investment exceeds certain amount, market entry clearance by MOFCOM or its local counterparts would be required.

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.

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”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
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.


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.


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.


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.


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.


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.


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.