China further eases foreign investment restrictions

China’s Ministry of Commerce (MOFCOM) and National Development and Reform Commission (NDRC) have issued the Special Administrative Measures on Access to Foreign Investment (Negative List) (2018 Version), which took effect on 28 July 2018 and replaced the earlier measures of 2017. In addition, MOFCOM and NDRC issued the Special Administrative Measures on Access to Foreign Investment in Pilot Free Trade Zones (Negative List) (2018 Version), which took effect on 30 July 2018 and replaced the earlier measures of 2017. Each list further opens up certain sectors to foreign investment.

Nationwide negative list

The nationwide negative list sets out the “restricted” and “prohibited” sectors in which foreign investment is either prohibited or restricted (thereby requiring pre-approval by MOFCOM). If a sector is not included in the list, it is classified as a sector in which foreign investment is “permitted”. “Encouraged” sectors are listed in the Catalogue for the Guidance of Foreign Investment Industries, which was last issued in 2017. The new nationwide negative list opens up 22 areas to foreign investment, predominantly in services and manufacturing, and sets a timetable for opening up the automobile and finance sectors.

China’s newly issued negative lists demonstrate that it is taking concrete and significant steps to open up previously restricted sectors to foreign investment at a faster rate than has been seen in previous years. The new negative lists should present many opportunities for existing and prospective foreign investors active in the liberalized sectors.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by emailing Danian Zhang at danian.zhang@bakermckenzie.com.