China Revises Lists Related to Foreign Investment
Recently, China has taken several measures that could potentially have an impact on foreign investment in China, including expanding the list for encouraged foreign investment and shortening the negative list for market access.
On December 28, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) released the 2020 Catalogue of Encouraged Industries for Foreign Investment (《鼓励外商投资产业目录（2020年版）》). This Catalogue will take effect on January 27, 2021.
The 2020 version has 1,235 items, compared to 1,108 in the 2019 version. In particular, it added 127 items and revised 88 items. The new version has 480 items for encouraged industries nationwide, and 755 items that only apply to the mid-west region. According to the Catalogue, China seeks to attract foreign investment in artificial intelligence, semiconductors, 5G, blockchain, ECMO machines, and medical apparatus. It also encourages foreign investment in online service such as online education and telehealth. Investments that fall within the Catalogue list would enjoy preferential tax and land-use policies.
The Catalogue has a Prohibited Section and a Restricted Section. The Prohibition Section contains five categories that are prohibited under various laws and regulations. For instance, investments in the sectors that should be eliminated under the Catalogue for Guiding Industrial Restructuring are prohibited. The Restricted Section has 118 Categories. Investment in the restricted industries must file an application. Investment in the industries that are outside of the list, by contrast, do not require an official approval. Investors can now participate without approval in oil and gas exploration and exploitation, as well as cross border transport of RMB by non-banking financial institutions.
In the same month, the NDRC and MOFCOM also reduced the number of industries that are on the negative list for market access that applies to both foreign and domestic actors. Under the 2020 version of Negative List for Market Access (《市场准入负面清单（2020年版）》), 123 industries are subject to investment restrictions, down from 131 industries on the 2019 list.
In addition to the Negative List for Market Access, foreign investors are also subject to the Negative List of the Special Administration Measures for Foreign Investment Market Access (2020 version) (Negative List for Foreign Investment) and Negative List of the Special Administration Measures for Foreign Investment Market Access in Pilot Free Trade Zones (2020 version). The 2020 version of the Negative List for Foreign Investment was published in July of 2020, and only applies to foreign but not domestic players. The Negative List for Foreign Investment has been shortened over the past couple years. In 2020, air traffic control, financial service, nuclear fuel production, and Chinese patent medicine manufacturing are open to foreign investors. However, foreign investors are still subject to certain restrictions in investments in automobile manufacturing, movie importation, and airport construction.