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Foreign Investments Opening in China’s Major Industries

Posted by: Zhorea Garcia
Category: Business in Asia, Economy & Trade
Foreign Investments Made More Accessible in China

From 2017 to 2019, China has continuously revised its Negative List of industries to attract more foreign investments. This year, the government introduced a new development which includes further access to the services, manufacturing, and agriculture sectors. Moreover, the said revision is part of the country’s implementing regulations concerning the new Foreign Investment Law.

Have a look at our previous article on China’s New Foreign Investment Law: All You Need to Know

What are the changes made to China’s Negative List and what does this mean for foreign businesses? Keep reading to learn more.

2020 Negative List edition – What’s new for foreign investments?

Effective on July 23, 2020, the Negative List of industries is narrowed down including the foreign investment restrictions to the Pilot Free Trade Zones. According to the joint notice of the National Development and Reform Commission and the Ministry of Commerce, the new Negative List 2020 at the national level is reduced from 40 to 33 or 17.5 percent. On the other hand, the 2020 FTZ Negative List is cut down from 37 to 30 or 18.9 percent.

Amid the global impact of the COVID-19 pandemic, China’s State Council deemed the revision as a measure to further open multinational investments and show support for economic globalization. In June 2019, China has already made efforts to further decrease the sectors belonging to its Negative List.

Read more about it here: Negative List of Industries for Foreign Investors in China

Sectors benefitting from the new Negative List of foreign investments

Services

Financial sector: The new Negative List removed the restrictions on foreign shareholdings. For instance, the amended rule has lifted the foreign ownership caps on securities and futures. These include:

  • Securities companies
  • Securities investment fund management companies
  • Futures companies
  • Life insurance companies

Infrastructure sector: Previously, China required that the construction and operation of water supply and drainage pipe networks in cities with a population of more than 500,000 must be controlled only by Chinese parties. This restriction has also been lifted effective on July 23.

Transportation sector: Foreign investments in public air transport companies are allowed but on a ratio that does not exceed 25 percent. In contrast, the amendment concluded the non-participation of foreign investors in the construction and operation of airport towers.

Leasing and business services and health and social work sector: Previously, foreign participation was limited to equity or cooperative joint venture. However, the new rule eliminated the “cooperative joint venture” in relation to the revised law on Sino-foreign joint ventures. Thus, market research projects and medical institutions are limited to “joint ventures”, respectively.

Manufacturing and agriculture

Manufacturing sector: The relevant departments also announced the liberalization of the restrictions on foreign shares regarding commercial vehicle manufacturing. Furthermore, foreign investors can now have access to investments related to the smelting and processing of radioactive minerals and the production of nuclear fuel.

Agriculture sector: The Chinese party’s share in the selection and breeding of new wheat varieties and seed production has been relaxed to not less than 34 percent. On the other hand, the Chinese party shall control the selection and breeding of new corn varieties and seed production.

Opened sectors in FTZs

Pharmaceutical sector: Foreign investment in Chinese herbal medicine involving extracts is now allowed.

Education sector: Wholly Foreign-Owned Enterprises (WFOEs) can now establish institutions for vocational and training education.

Key takeaways

Under the new Foreign Investment Law, China’s NDRC emphasizes an exemption in the new Negative Lists. According to NDRC’s statement during an interview, the provisions may not apply for specific foreign investments depending on the approval of relevant authorities. Hence, it signals a more welcoming opportunity and a greater chance for foreign investors to do business in China.

Contact us

If you want further assistance with investing in the relevant sectors, you may email us at [email protected] or call our offices in different China locations. Our local experts will attend to your needs. Also, visit our corporate finance page to see more details of our business-related specialist services.

Moreover, your company can take advantage of our easy-to-use, 24-hour access management tool like Kwikdroid. Kwikdroid is a Cloud-based accounting and company solution that will be made available in your workplace in no time.

S.J. Grand also offers Cloud ERP services for your business if you are currently experiencing difficulty in managing your operations amid the COVID-19 pandemic. Check out our IT services page for more details.

Check out COVID-19 related news on our COVID-19 Policy Briefings.

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Author: Zhorea Garcia

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