China's New Negative Lists for Foreign Investment: More Openness, More Opportunity

August 08, 2019 | BY

Susan Mok

Amidst growing trade friction with the U.S., Scott Yu and Derek Liu of Zhong Lun Law Firm note some particular highlights for foreign investors in the latest iteration of China's Negative Lists and Encouraged Investment Catalogue.

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On July 30, 2019, the Special Administrative Measures for Foreign Investment Access (Negative List) (2019 Edition) (外商投资准入特别管理措施 (负面清单) (2019年版))(the 2019 Nationwide Negative List) and the Special Administrative Measures for Foreign Investment Access in Free Trade Zones (Negative List) (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)) (the 2019 FTZ Negative List) (collectively, the "2019 Negative Lists") came into force.  The two negative lists were jointly released by China's National Development and Reform Commission (NDRC) and Ministry of Commerce (MOFCOM) based on the 2018 editions.

On the same day, the Catalogue of Encouraged Foreign Investment in Industry (2019 Edition) (鼓励外商投资产业目录 (2019年版)) (the 2019 Encouraged Catalogue) previously released by the NDRC and MOFCOM also came into force.

The newly revamped 2019 Negative Lists and 2019 Encouraged Catalogue are among various key initiatives that the Chinese government has recently taken to further liberalize the environment for, and offer greater market access to, foreign investment. These publications highlight China's commitment to continue its "opening-up" policy to foreign capital, especially in the context of the trade friction with the U.S.

The renewal of the two negative lists is also said to be in response to the administration scheme of "pre-establishment national treatment plus negative listing" over foreign investment under China's newly-adopted Foreign Investment Law (FIL), which will come into force at the beginning of 2020. Foreign investment in anything not listed on the 2019 Negative Lists will be granted equal access and equal treatment as compared to domestic investment.

Shorter 2019 Negative Lists

The 2019 Nationwide Negative List has continued the pattern of cutting down the restricted and prohibited sectors and special administrative requirements of foreign investment; the number has fallen from 48 in the 2018 edition to 40 in 2019, while the 2019 FTZ Negative List only includes 37 negative listings.

The main changes in the 2019 Nationwide Negative List can be summarized as follows:

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2018 Nationwide Negative List 2019 Nationwide Negative List
Oil, natural gas exploration/exploitation (joint ventures with Chinese partners only) Deleted
Exploration and exploitation of tungsten, molybdenum, tin and fluorite mines (prohibited) Deleted
Construction and operation of gas and heat supply networks for cities with populations of at least half a million (Chinese majority ownership only) Deleted
Certain value-added telecommunications services (i.e. call centers, store-and-forward services and domestic multiparty communications) (Chinese majority ownership only) Deleted
Operation and construction of theaters (Chinese majority ownership only) Deleted
Show/performance agencies (Chinese majority ownership only) Deleted
Domestic ship agency companies (Chinese majority ownership only) Deleted
Manufacture of rice paper and ink stick (prohibited) Deleted
Development of wild animals and plants originated from PRC (prohibited) Deleted

Similarly, besides the above removal nationwide, the 2019 FTZ Negative List further reduces and deletes some restrictions/prohibitions relating to the 12 free trade zones (FTZs) which China had launched as of July 30, 2019 (located in Shanghai, Guangdong, Tianjin, Fujian, Zhejiang, Henan, Sichuan, Shaanxi, Hubei, Chongqing, Liaoning and Hainan):

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