Foreign Investment Catalogue: Foreign investment in China is subject to regulatory approval and registration procedures. In this regard, reference should be made to China’s Foreign Investment Industrial Guidance Catalogue (“Catalogue“), Special Management Measures for the Market Entry of Foreign Investment (“Negative List”) and to sector-specific regulations. Based on the Catalogue and Negative List, foreign investment projects in the PRC are classified as “encouraged“, “restricted“, “prohibited” or “permitted“.
The Catalogue and Negative List comprehensively and uniformly applies to all areas in China. One exception is the free trade zones (“FTZs“), where the PRC national government has liberalized foreign investment in some sectors that in areas outside the FTZs are “restricted” under the Catalogue.
On June 28, 2018, MOFCOM and NDRC issued the updated Catalogue which provided a list of Encouraged industries and a Negative List of industries either prohibited from foreign investment or requiring specific approval by MOFCOM for foreign investment.
- foreign investments listed as “encouraged” are usually either those targeting the industrial production of equipment needed by China, or those relying on the use of advanced technology not yet mastered by China. Encouraged investments may enjoy preferential policies in accordance with specific laws and regulations.
Negative List – several reasons can justify why an investment sector appears in the Negative List:
- There is already an overcapacity of this kind of investment, or
- The technologies used are considered as out of fashion or are already mastered by China, or
- The technologies are protected by the government from foreign competition, or
- Sensitive sectors such as news, publication, media, education, etc. on which Chinese authorities want to keep full control.
The updated Catalogue marks another step towards the further opening of certain sectors of the Chinese economy to foreign investment, and the Negative List will serve as a reference for foreign investors to determine whether their investments are subject to the MOFCOM approval under the new FIE record system.
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