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China: Catalog of Foreign Investment Industries Updated

(Aug. 7, 2017) On June 28, 2017, China’s National Development and Reform Commission (NDRC) and Ministry of Commerce (MOFCOM) released the 2017 edition of the Catalog for the Guidance of Foreign Investment Industries, which came into effect on July 28, 2017 (2017 Catalog). The 2017 Catalog cuts 30 “special administrative measures” restricting foreign investment, from 93 in the 2015 version to 63 in the 2017 version, and introduces a nationwide negative list system for market access of foreign investment.  (Waishang Touzi Chanye Zhidao Mulu (2017 Nian Xiuding) (2017 Catalog) (NDRC and MOFCOM, June 28, 2017, effective July 28, 2017), State Council website; 7 Yue 28 Ri Qi Zai Quanguo Fanwei Nei Shishi Waishang Touzi Zhunru Fumian Qingdan —Waishang Touzi Chanye Zhidao Mulu (2017 Nian Xiuding) Shuoming; [Negative List for the Foreign Investment Access Introduced Nationwide from July 28 — Explanation of the Catalog for the Guidance of Foreign Investment Industries (2017 Revision)] (NDRC Explanation), NDRC website (June 28, 2017).)

Previously, such catalogs were divided into the three categories of encouraged, restricted, and prohibited industries for purposes of market access of foreign investment in China. The 2017 Catalog keeps the encouraged category and provides a “negative list” of the special administrative measures that contains the restricted and prohibited categories and also restrictions such as equity ratio and senior executive requirements for certain types of foreign investment industries.  Investment restrictions that apply to both foreign and domestic investments and those not related to market access are not included on the negative list.  (2017 Catalog, supra.)

Under the new negative list system, in principle, in areas of investment other than those listed on the negative list, no restrictive measures should be applied to foreign investment access, and setting up projects and enterprises with foreign investment in such areas will be subject only to record-filing requirements, but not pre-approvals, from the authorities. (NDRC Explanation, supra.)

Compared with the previous, 2015 Catalog, the 2017 Catalog opens up more sectors in the services, manufacturing, and mining industries. Previous special administrative measures applied by the 2015 Catalog to the following industries, for example, are removed: operation of highway passenger transport services; operation of accounting and auditing services; manufacturing of rail transport equipment; manufacturing of automobile electronic networks and electronic controls for electric power steering systems; and exploration and development of unconventional oil and gas resources such as oil shale, oil sands, and shale gas.