China’s Foreign Investment Negative List 2020 came into operation

Contents

On June 30, 2020, approved by the Central Party Committee and the State Council, the National Development and Reform Commission (NDRC) and the Ministry of Commerce announced the Special Administrative Measures (Negative List) for Foreign Investment Access (Edition 2020) (“Foreign Investment Negative List 2020”), and the Foreign Investment Access (Edition 2019) on June 30, 2019 shall be repealed simultaneously.
Comparing with Edition 2019, the items in the Edition 2020 are reduced from 40 to 33 items, with a reduction ratio of 17.5%. On the very same day, the two departments also announced the Special Administrative Measures (Negative List) for Foreign Investment Access in Pilot Free Trade Zones (Edition 2020) (“FTZ Negative List 2020”), which reduced from 37 to 30 comparing to its edition in 2019, with a reduction ratio of 18.9%. This is the fourth consecutive year since 2017 that China has revised the national version and free trade zone version of the negative list for foreign investment access. 

Further opening of the financial industry

Negative List 2020 and FTZ Negative List 2020 further opened up the financial sector, abolished the restrictions on the ratio of foreign shares of securities companies, securities investment fund management companies, futures companies and life insurance companies. In fact, in July 2019, the Office of Financial Stability and Development Commission of the State Council has announced 11 measures for further opening up the financial industry to the outside world. Foreign Investment Negative List 2020 and FTZ Negative List 2020 bring forward the pre-scheduled time point of abolishing the restrictions on foreign shares of securities companies, fund management companies and futures companies from 2021 to 2020.

Access to manufacturing and agriculture industry

Comparing with Edition 2019, in the manufacturing sector, Negative List 2020 and FTZ Negative List 2020 eased the restrictions on foreign shares in commercial vehicle manufacturing and abolished the provisions prohibiting foreign investment in radioactive mineral smelting, processing and nuclear fuel production. Further easing the access of foreign investment in manufacturing industry will help to promote fair competition between foreign-invested enterprises (FIE) and domestic enterprises, and further activate the development and the orderly competition of the domestic market. At the same time, in the field of agriculture, the provision of  new wheat varieties breeding and seed production must be controlled by Chinese investors is now changed into no less than 34% of the Chinese equity. Easing the access restrictions in the agricultural field is a practical need to expand the opening up of agriculture, improve the competitiveness of agricultural enterprises, and promote the high-quality development of agriculture in China.

Increase the infrastructure and openness

Meanwhile, in the field of infrastructure, the restriction that the construction and operation of urban water supply and drainage pipelines with a population of more than 500,000 population must be controlled by Chinese investors has been abolished.
In the manufacturing sector, foreign ownership caps on commercial vehicle manufacturing will be lifted, and regulations prohibiting foreign investment in the smelting and processing of radioactive minerals and nuclear fuel production will also be eliminated. Also, foreign investors ownership in wheat breeding, seed production would be raised to 66 percent of the company.

Further open up of the pilot free trade zone

On the basis of the national version of the opening-up measures, the Free Trade Zone will continue to lead the time. But in the field of pharmaceutical industry, the prohibition of foreign investment in Chinese herbal pieces has been abolished. In the field of education, Wholly Foreign-Owned Enterprises (WFOE) are now allowed to set up vocational education institutions with educational system. These measures will help understand the development of relevant fields in the free trade zone after opening up, and promote the steady and orderly development of China’s opening up to the world. Comparing with the 2019 FTZ Negative List, the 2020 FTZ Negative List basically adopts the same arrangements on “Relaxation of restrictions”, “Lifting of prohibitions or restrictions”, and “Special provision”, as set out in the above table regarding the 2020 National Negative List.

Conclusion

In great Chinese leader‘s words, China will lift all foreign investment restrictions beyond the negative list, and provide equal treatment to all types of businesses registered in China in the post-establishment phase. A complaint mechanism will be set up for foreign companies to air their grievances.

This article is only an overview of China’s negative lists 2o2o for foreign investment access. Links are provided in the Resources section. 

 

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