The new and improved Negative List for China's free trade zones

October 12, 2017 | BY

Katherine Jo &clp articles

The redesigned 2017 Negative List applicable to China's 11 free trade zones signifies another big step forward for the nation's foreign investment regime

Foreign investment in China, regardless of industry or manner, has traditionally been subject to regulatory approvals, which were often exercised with discretion by the local authorities. The government has been gradually deregulating foreign investment market access over the past decade, however, with several substantial reforms taking place in recent years.

Since the establishment of the China (Shanghai) Pilot Free Trade Zone in 2013, the central government adopted a new regulatory regime for foreign investment in the pilot free trade zones by applying a negative list system in the name of the Special Administrative Measures for Foreign Investment Access in Pilot Free Trade Zones (Negative List) (2017 Edition) (自由贸易试验区外商投资准入特别管理措施 (负面清单)) (FTZ Negative List).

How the FTZ Negative List works

Unlike the previous regime in which all foreign investment required pre-approval, the FTZ Negative List sets out the industries and businesses that are prohibited or restricted in the free trade zones. Specifically, it includes all the “special administrative measures”—or restrictions—applicable to foreign investment but are not consistent with the principle of national treatment.

From a regulatory perspective, foreign investment in the industries that appear on the FTZ Negative List but are not prohibited are subject to approval. For industries not on the FTZ Negative List, foreign investors would receive equal treatment to domestic investors in the pilot free trade zones, meaning the investment is subject to a relatively straightforward filing formality.

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