T he National Development and Reform Commission and the Ministry of Commerce recently unveiled a revised version of the Catalogue for the Guidance of Foreign Investment this year. The 2017 edition of the investment guidelines is the seventh revision since the Catalogue was first published in 1995.

 

In past years, the Catalogue was divided into three broad categories -- encouraged investment, limited investment and prohibited investment. The new Catalogue has undergone a structural adjustment so that the areas of restriction (such as those business sectors where there are shareholding limits or requirements of who can serve as a senior executive) and areas of absolute prohibition will be managed by means of a “negative list.” This conforms with the concept of allowing investment except in areas where curbs are specifically designated. With the full implementation of national treatment under a negative list form of management, foreign investment projects do not require specific approval in the encouraged areas. Registration with commercial authorities is solely for documentation purposes.

 

The new Catalogue retains a total of 63 previous areas of restrictions on foreign capital (including 35 categories where there are limitations and 28 where investment is prohibited). The new list removes 30 areas that were restricted or barred in the 2015 Catalog (including 19 areas with shareholding requirements as well as 38 restricted areas and 36 where investment is prohibited). Restrictions on investment in the service sector have been removed, specifically in road passenger transport, ocean shipping tally business, credit investigation and rating services, accounting and auditing, wholesale marketing of agricultural products and water conservancy. Restrictions have been removed in manufacturing, specifically rail transport equipment, automobile electronics, batteries for new energy vehicles, motorcycles, marine engineering equipment, marine diesel engines, civilian satellites, edible oils, rice, flour, raw sugar, corn, ethanol and the biodiesel sector. Limits on foreign manufacturers to establishing no more than two joint ventures in pure electric automobile production have been scrapped. The mining industry has also done away with restrictions on foreign investment in non-conventional oil and gas (such as shale), precious metals, lithium and some non-ferrous metals smelting.

 

As far as the restrictions on foreign investment are concerned, the new Catalogue adds some new areas, specifically in the culture and advertising spheres, radio and television programming, satellite TV broadcasting receiving facilities and internet news and information.

 

At the same time, the number of items classified as areas where investment is encouraged remains basically unchanged. Compared with the 2015 Catalogue, six items have been added and seven deleted. The added incentives include “smart” medical emergency equipment, hydrologic monitoring sensors, virtual reality (VR), augmented reality (AR), 3D printing, hydrogen refueling stations and urban parking facilities.

 

As China actively promotes a "going out" strategy that encourages its own companies to take a more active role in the global economy, it is also adhering to its pledges to open its economy further and bring in new forms of investment.

 

The Special Management Measures for Foreign Investment in Free Trade Areas, which also embraces a negative list concept, is already in effect. The negative list of free trade areas already offers foreign investors a relatively higher degree of openness, and with the increasing number of free trade areas around the country, each with its own development priorities, foreign investors may find that these free trade areas are an attractive location for their China investments. The recently published Negative List Catalogue for the Opening Up of the Financial Industry in China (Shanghai) Free Trade Zone (2017), is an updated version of the country's first negative list for the financial sector.

 

Meanwhile, Beijing and Hong Kong have reached a new version of the Closer Economic Partnership Arrangement (CEPA) that promotes trade between the China mainland and the former British colony. Under the new arrangement, there are only 26 areas where Hong Kong's investment in the mainland is limited while there is more favorable treatment in shipbuilding and aircraft manufacturing, resource and energy extraction and financial market investment tools. There is also another clear statement that Hong Kong receives the most favorable treatment in regards to investment. There is also a similar accord between the mainland and Macao, as well as the Cross-Strait Economic Cooperation Framework Agreement (ECFA) reached with Taiw