In 2016, with a global decrease of cross-border investment, China still attracted foreign investment of more than US$813.2 billion, more than a 4.2% increase on the previous year. Against this backdrop, China’s central government has continued its opening-up policy by issuing more policies in the new year to attract further foreign investment.
In the first quarter of 2017, the government issued several policies to drive the expansion of opening up to foreign countries, and enhancing the attractiveness of China for foreign investment and capital. Among these policies, the Notice of Measures regarding the Expansion of Opening to the Outside and Positively Using Foreign Capital by the State Council of the People’s Republic of China is a guiding document for using foreign capital. The Catalogue of Priority Industries for Foreign Investment in Central and Western China was also updated and issued, which aims to increase new industries to encourage foreign investment in central and western China. In this article, the authors discuss these two policies.
The State Council issued the notice on 17 January 2017. It includes 20 measures involving three areas. The first area is expansion of opening up to the world outside China, such as by expanding the access of the service, manufacturing and mining industries to foreign capital, and to support foreign capital joining the “Made in China 2025” strategy, which helps foreign capital integrate with the transformation and upgrade of the manufacturing industry. The notice also creates a level playing field by treating foreign-invested enterprises and domestic enterprises equally, such as by supporting and encouraging foreign-invested companies to be listed on the Shanghai Stock Exchange, Shenzhen Stock Exchange and the National Equities Exchange and Quotations, and to issue bonds and convertible loans.
The notice strengthens the policy of attracting foreign capital, allowing local government to formulate preferential policies regarding inviting investment within its statutory jurisdiction to support projects that make a contribution to employment, economic development and technological innovation.
The Catalogue of Priority Industries for Foreign Investment in Central and Western China (2017 revision) was issued on 17 February 2017 and became effective on 20 March 2017. The catalogue covers 22 provinces, direct-controlled municipalities and autonomous regions in China and stipulates industries that may take advantage of localities but do not fall into the category of encouraging industry in the Catalogue of Industries for Guiding Foreign Investment, and that may enjoy preferential policies as well as encourage foreign investment. Major preferential policies for industries under this catalogue include the following:
(1) Self-use equipment exempt from customs duties within amount of total investment;
(2) Giving priority of land supply to projects with intensive land use and allowing that amount of land reserve may be no less than 70% under Minimum Standards of National Industrial Land Transfer; and
(3) Qualified foreign-invested enterprises in western China may enjoy preferential policies on enterprise income tax.
The catalogue, compared to the previous 2013 version, made the following updates:
(1) Giving impetus to traditional industrial transformation and upgrading, such as increasing the industry of green foods processing in Heilongjiang province, and increasing the industry of vegetable processing with a standardized facility in the Inner Mongolia Autonomous Region;
(2) Supporting the development of high-tech adaptive industries to promote development of electronic and medical industries, such as increase manufacture of TFT-LCD, OLED and other flat display panels in Sichuan province, and increasing research and development of integrated circuit and production facilities in Shaanxi province;
(3) Encouraging development of the service industry by increasing the engineering survey design industry in Anhui province;
(4) Promoting the development of labour-intense industry by increasing furniture design, processing and manufacturing in Jiangxi and Yunnan provinces, forming new export industrial clusters and relocating labour from eastern China;
(5) Supporting production by increasing automobile and infrastructure construction and operations in Shanxi, Hubei, Yunnan and Shaanxi provinces, the Inner Mongolia Autonomous Region, and Guangxi Autonomous Region; and
(6) Adjusting the previous catalogue to adapt to new situations.
The notice is a guidance policy to point to measures that expand China’s opening-up, while the catalogue is revised to be consistent with the notice. Because using foreign capital is a national policy and a significant part of opening the economy, the authors believe other related policies that are indicated as measures under the notice will be issued shortly.
Harry He is a senior partner and Celine Huang is a lawyer at AllBright Law offices in Shanghai
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