New Foreign Investment Negative List
The National Development and Reform Commission and the Ministry of Commerce have issued updated versions of the so-called negative list that permits greater foreign investment in China. The new negative lists ¨C the Special Management Measures for Foreign Investment Access (Negative List 2018 Edition) and the Special Management Measures for Foreign Investment Access in the Free Trade Zone (Negative List 2018 edition) ¨C seek to put in place realistic requirements for higher quality development of China's economy. This regulatory framework，which essentially allows foreign investment in all areas not specifically restricted，takes into consideration the concerns and requirements of foreign-invested enterprises.
In general，the new negative lists continue the trend towards an even more open economy.
As there are still a number of shortcomings in China's market opening effort，it is necessary to further reduce barriers to investment and thereby achieve breakthroughs in major areas of the economy.
The latest national negative list has relaxed controls over market access in the primary，secondary and tertiary industries. It covers finance，transport，trade and commerce，professional services，manufacturing，infrastructure，energy，resources，and agriculture among other fields. A total of 22 major measures were introduced and the number of areas of restrictions on investment was reduced from 63 to 48. In the financial sector，the ceiling on the percentage of foreign ownership of banks has been removed completely and the caps on foreign shareholdings in securities，fund management，futures and life insurance companies in China has been raised to 51%.
In addition，all restrictions on foreign holdings in the financial sector will be abolished by 2021. In the manufacturing sector，restrictions on foreign investment levels in special and new energy vehicles in the auto sector have already been removed. By 2020，the restrictions on foreign investment in all commercial vehicles will be abolished. In 2022，China will remove the restrictions on foreign investment in passenger vehicles and scrap the limit of two joint ventures in the production of complete vehicles. In addition，restrictions in shipbuilding and aircraft design，manufacturing，and maintenance will be scrapped.
It should be noted that the opening up of these investment areas is based on the assessment of the competitiveness of Chinese domestic industries. Some of the market-opening moves have duplicated the successes with negative list treatment in pilot projects in free trade zones. Some measures which are designed to relax or cancel restrictions on foreign investment are based on existing policies. Further market opening measures are likely in future. After years of development since the reform and opening program began，China's domestic industries have become considerably more competitive. They will be able to withstand the additional competition and will benefit from the infusion of technology brought about by foreign competition.
Another objective of these measures is to increase predictability. Foreign-invested companies have complained of insufficient predictability and continuity in China's foreign investment policies. The new negative lists have given certain industries a transition period to adjust to policy changes and this has further enhanced the predictability of market opening measures. Foreign-invested companies will have a better understanding of policy direction and this will allow them to more accurately anticipate costs as they make business decisions.
The national negative list，formerly part of the Guidance Catalogue for Foreign Investment Industries，was published separately in 2018. This improved transparency and standardization. The 2018 National Negative List，in accordance with the National Economic Industry Classification，lists the special management measures，such as the maximum permitted equity ratios and requirements for executives in specific sectors. It also deletes provisions that any separately stipulated laws and regulations should be followed and states that local and regional authorities should not place other restrictions on market access by foreign investors.
The 2018 Free Trade Zone Negative List is being implemented in tandem with new pilot projects. The pilot free trade zones shoulder the burden of promoting institutional innovation，accelerating the transformation of the economy and deepening the economic opening. These are effectively a market opening stress test in sensitive industries. Policies in the pilot free trade zone allow experience that can be applied on a national scale. There are 45 items on the 2018 Free Trade Zone Negative List，down from 95 in 2017. In terms of relaxing market access，in addition to opening up measures consistent with the 2018 National Negative List，there are further opening up measures in the following areas. For instance，in the agricultural sector，the maximum ratio of foreign ownership in the production of new varieties of wheat and corn seeds has been increased to 66% from no more than 49%. Regulations restricting foreign participation in oil and natural gas exploration and development to joint ventures have been scrapped as has the ban on investment in radioactive minerals and nuclear fuel production. In the cultural field，a ceiling on foreign investment in agencies representing performers has been abolished，and the ban on investment in entertainment and performing arts has been relaxed，though Chinese interests must retain ultimate control. In the field of value-added telecommunications