China’s Ministry of Commerce (MOFCOM) and National Development and Reform Commission (NDRC) have issued the Special Administrative Measures on Access to Foreign Investment (Negative List) (2018 Version), which took effect on 28 July 2018 and replaced the earlier measures of 2017. In addition, MOFCOM and NDRC issued the Special Administrative Measures on Access to Foreign Investment in Pilot Free Trade Zones (Negative List) (2018 Version), which took effect on 30 July 2018 and replaced the earlier measures of 2017. Each list further opens up certain sectors to foreign investment.

Nationwide negative list

The nationwide negative list sets out the “restricted” and “prohibited” sectors in which foreign investment is either prohibited or restricted (thereby requiring pre-approval by MOFCOM). If a sector is not included in the list, it is classified as a sector in which foreign investment is “permitted”. “Encouraged” sectors are listed in the Catalogue for the Guidance of Foreign Investment Industries, which was last issued in 2017. The new nationwide negative list opens up 22 areas to foreign investment, predominantly in services and manufacturing, and sets a timetable for opening up the automobile and finance sectors.

China’s newly issued negative lists demonstrate that it is taking concrete and significant steps to open up previously restricted sectors to foreign investment at a faster rate than has been seen in previous years. The new negative lists should present many opportunities for existing and prospective foreign investors active in the liberalized sectors.

The major changes

From prohibited to permitted

  • Manufacture of weapons and ammunition
  • Business premises for internet access services

From restricted to permitted

  • Selection and cultivation of new varieties of crops, and production of seeds, aside from wheat and corn
  • Exploration and exploitation of special and rare kinds of coal
  • Exploration and exploitation of graphite
  • Smelting and separation of rare earth and smelting of tungsten
  • Manufacture of special use vehicles and new energy vehicles
  • Design, manufacture and repair of ships (including sections)
  • Design, manufacture and maintenance of aircraft for trunk and tributary lines, design and manufacture of helicopters at the level of three tons or more, manufacture of ground-effect and water-effect aircraft, and design and manufacture of UAV and aerostats
  • Design, manufacture and maintenance of general aircraft
  • Construction and operation of power grids
  • Construction and operation of network of trunk railway lines
  • Railway passenger transport companies
  • International marine transportation companies
  • International shipping agencies
  • Purchase and wholesale of rice, wheat and corn
  • Construction and operation of gas stations
  • Banks (previous restrictions on the proportion of foreign equity no longer apply)
  • Futures companies (foreign equity restriction increased to 51%)
  • Securities companies (foreign equity restriction increased to 51%)
  • Fund management companies (foreign equity restriction increased to 51%)
  • Insurance companies (foreign equity restriction increased to 51%)
  • Surveying and mapping companies

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by emailing Danian Zhang at danian.zhang@bakermckenzie.com.