On June 30, 2020, China announced the Foreign Investment Negative List 2020 (hereinafter referred to as the “Negative List for Foreign Investment Access“). Compared with Edition 2019, the items in Edition 2020 are reduced from 40 to 33 items, with a reduction ratio of 17.5%.
On the same day, China National Development and Reform Commission (NDRC) and China Ministry of Commerce also announced the Negative List for Foreign Investment Access in Pilot Free Trade Zones 2020 (hereinafter referred to as “FTZ Negative List 2020”), which reduced from 37 to 30 compared 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 the free trade zone version of the negative list for foreign investment access.
What is the Edited Items of the two Negative Lists
Further opening of the financial industry
Foreign Investment 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. The two lists 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 the manufacturing and agriculture industry
Compared with Edition 2019, in the manufacturing sector, the two lists 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 the 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.
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 the 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 the 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.
The English Version of Negative List 2020
I. The Special Administrative Measures (Negative List) for Foreign Investment Access sets out on a unified basis the special administrative measures for foreign investment access such as equity requirements, senior management personnel requirements, etc. Fields not mentioned in the Negative List for Foreign Investment Access are administered under the principle of equal treatment for domestic and foreign capitals.
II. The Negative List for Foreign Investment Access has listed a transitional period for cancellation or relaxation of the access restrictions for some fields and will cancel or relax the access restrictions on time after the transitional period expires.
III. No overseas investor may engage in investment and business activities in the capacity of an individually-owned business, an investor in a sole proprietorship enterprise, or a member of a farmers’ cooperative.
IV. When performing duties pursuant to the foreign investment law, the relevant authorities shall not process relevant matters including the application permit, enterprise registration, etc. for proposed investments by overseas investors in fields mentioned in the Negative List for Foreign Investment Access that does not comply with the provisions of the Negative List for Foreign Investment Access; where approval for a fixed asset investment project is involved, the relevant approval matters shall not be processed. No foreign-invested partnership business may be established in any investment field subject to equity requirements.
Category 1: Agriculture, forestry, animal husbandry, fisheries
1. The proportion of Chinese companies in the selection and seed production of new varieties of wheat should not be less than 34%. Chinese companies must have a controlling stake in the selection and seed production of new varieties of corn.
2. Investment in the development, breeding, cultivation, and production of related reproductive materials (including the good genes of the cultivation, animal husbandry, and aquaculture industries) of rare and unique Chinese varieties is prohibited.
3. It is prohibited to invest in the selection and breeding of genetically modified varieties of crops, livestock and poultry, and the production of genetically modified seeds (seedlings).
4. It is forbidden to invest in the fishing of aquatic products in the sea areas under China’s jurisdiction and inland waters.
Category 2: Mining
5. Investment in rare earth, radioactive minerals, tungsten exploration, mining, and mineral processing is prohibited.
Category 3: Manufacturing
6. Chinese companies must have a controlling stake in the publishing & printing industry.
7. It is prohibited to invest in the application of traditional Chinese medicinal decoction pieces, such as steaming, frying, roasting and calcining, etc. It is prohibited to invest in the production of traditional Chinese medicine confidential prescription products.
8. The Chinese share of vehicle manufacturing companies should not be less not than 50%, except for the special and new energy vehicles, commercial vehicles. (In 2022 the restriction of foreign share ratio in passenger car manufacturing and the restriction of the same foreign company can establish two or fewer joint ventures in China to produce similar vehicle products will be removed.)
9. It is prohibited to invest in satellite TV broadcast ground receiving facilities and key parts production.
Category 4: Electricity, heat, gas, and water production and supply
10. Chinese companies must have a controlling stake in the construction and operation of nuclear power plants.
Category 5: Wholesale and retail
11. It is prohibited to invest in the wholesale and retail of tobacco leaves, cigarettes, re-baked tobacco leaves, and other tobacco products.
Category 6: Transport, warehousing, and postal services
12. It is required that Chinese companies have a controlling stake in domestic water transport.
13. Chinese public air transport enterprises shall be controlled by the Chinese side and if the proportion of investment by a foreign investor and its affiliated enterprises shall not exceed 25%, the legal representative shall be a Chinese citizen. The legal representative of General airlines must be a Chinese citizen, of which agriculture, forestry, and fisheries airlines shall be limited to joint ventures and other general-purpose airlines shall be limited to Chinese holdings.
14. Chinese companies must have a controlling stake in the construction and operation of civil airports.
15. It is prohibited to invest in the domestic express services provided by postal companies (and to operate postal services) and letters.
Category 7: Information transmission, software, and information technology services
16. Pursuant to China’s commitment to open the telecommunication sector to foreign investment, companies may have a value-added telecommunications business with no more than 50% of the shares belonging to foreign companies (except e-commerce, domestic multi-party communications, storage, and forwarding categories, call centers). The basic telecommunications business must be controlled by the Chinese partner.
17. It is prohibited to invest in Internet news information services, internet publishing services, network audio-visual program services, Internet cultural operation (except music), and Internet public information services (except for the contents already opened in China’s WTO accession commitments).
Category 8: Leasing and business services
18. It is prohibited to invest in Chinese legal affairs (except for information on the environmental impact of Chinese law), it is prohibited to be partners of domestic law firms.
19. Market research is limited to joint ventures company, and involving radio and television listening and viewing surveys is limited to joint ventures in which the Chinese company owns a controlling stake.
20. Investment in social surveys is prohibited.
Category 9: Scientific research and technology services
21. Investment in human stem cells, gene diagnosis, and therapeutic technology development and application are prohibited.
22. Investment in humanities and social science research institutions is prohibited.
23. It is prohibited to invest in geodesy, marine mapping, surveying and aerial photography, ground movement surveys, administrative area boundary mapping, topographic maps, maps of world political areas, maps of national political areas, maps of provincial and below political areas, national teaching maps, local teaching maps, true 3D maps and navigational electronic maps, regional geological mapping, mineral geology, geophysics, geochemistry, hydrogeology, environmental geology, geological disasters, remote sensing geology, etc. (Mining owner which working within the scope of mining rights is not restricted by this special management measure.)
Category 10: Education
24. Pre-school, ordinary high schools, and higher education institutions are limited to Sino-foreign cooperative running of schools and shall be controlled by the Chinese side (the principal or principal administrative officer shall have Chinese nationality and live in China. Board members should be Chinese, and the board of directors or joint management committee shall not have a ratio of less than 1/2.
25. Investment in compulsory education institutions and religious educational institutions is prohibited.
Category 11: Health and social work
26. Medical institutions are limited to joint ventures and cooperation.
Category 12: Culture, sports, and entertainment
27. Investment in news organizations (including but not limited to news agencies) is prohibited.
28. Investment in the editing, publication, and production of books, newspapers, periodicals, audio-visual products, and electronic publications is prohibited.
29. It is prohibited to invest in radio stations, television stations, radio and television channels, radio and television transmission coverage networks, and related infrastructure(Launch station, relay station, radio, and television satellite, satellite uplink station, satellite receiving, and transferring station, microwave station, monitoring station, and cable radio and television transmission coverage network, etc.). It is prohibited to engage in radio and television video-on-demand services and to install services at satellite television broadcast ground receiving facilities.
30. It is prohibited to invest in the production and operation of radio and television programs (including the introduction of business) companies.
31. It is prohibited to invest in film production companies, distribution companies, cinema chains companies, and film introduction businesses.
32. Auction companies, cultural relics stores, and state-owned cultural relics museums prohibit investment in auctions of cultural relics.
33. Investment in performing arts groups is prohibited.
- Edited by GWBMA
(Negative list 2020 published on this website is authentic in Chinese version. The English version is provided for reference only. )
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