China shortens the negative list again

In a recent step further in opening up the Chinese market, the National Development and Reform Commission (NDRC) and the Chinese Ministry of Commerce (MOFCOM), announced a shortened “Negative List” on June 30th, 2019. This list is known to govern the foreign investment in China. It imposes restrictions on certain sectors. After the recent revision, the number of restricted sectors has been reduced to 40 from 48 previously. These changes come after the new “cease fire” in the US-China trade war.

These three documents will take effect on July 30 this year:

• Special Administrative Measures for Access of Foreign Investment (Negative List), and
• Special Administrative Measures for Foreign Investment Access in Pilot Free Trade Zones (Negative List for Free Trade Zones).
• Catalog of Industries for Encouraged Foreign Investment

Main changes compared to the previous negative lists

The followings are the changes when compared to the negative list issued last December:

1. The service sector will see greater openings in transport, infrastructure, culture, and value-added telecommunications.

The following industries will not have to be controlled by a Chinese partner anymore:

•  domestic shipping agencies,
• gas and heat pipelines in the cities with a population of more than 500,000,
• cinemas and performance brokerage institutions,
• valued-added telecommunication services such as domestic multi-parties communications, store-and-forward and call center services.

The ban on foreign investment in value-added telecommunications services such as telephone and video conferencing, store and forward and call center services will be lifted.

2. Market access will be eased in agriculture, mining, and manufacturing industries.

• Prohibition on foreign investment in the exploitation of wildlife resources, the exploration, and development of petroleum and natural gas are limited to Chinese-foreign equity joint ventures or non-equity joint ventures.
• The exploration and exploitation of molybdenum, tin, antimony, and fluorite and the production of Xuan paper and ink ingots will be canceled.

The version of the negative list applicable to free trade areas also removes restrictions on foreign investment in sectors such as water products, fisheries, and publication printing.

Catalog of Encouraged Industries

In the catalog of encouraged industries, the Chinese government added many new items that show the preference for the high-end manufacturing industry. These include 5G core components, etching machines for integrated circuits, chip packaging equipment, cloud computing equipment, new energy vehicles, key components of intelligent vehicles, key raw materials of cell therapeutics, and more.

Other than these three documents, the MOC is combing through other regulations, which are not consistent with or diverge from the new negative lists and the new Foreign Investment Law. This is to make sure that these documents and the law will be executed smoothly.

As President Xi again pointed out at the G20 Summit, the Chinese government aims to attract more foreign investors, improve China’s investment environment and provide foreign investors a fair field with the national players competing in this huge market.

Original documents (in Chinese)

• Negative List 2019 Edition: Special Administrative Measures for Access of Foreign Investment (《外商投资准入特别管理措施（负面清单）（2019年版）》)
• Free Trade Zones Negative List: Special Administrative Measures (Negative List) for Foreign Investment Access in Pilot Free Trade Zones (2019 Edition) (《自由贸易试验区外商投资准入特别管理措施（负面清单）（2019年版）》)
• Investment Catalogue: Catalog of Industries for Encouraged Foreign Investment (2019 Edition) (《鼓励外商投资产业目录（2019年版）》)