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15 July 2015

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China's 2021 Negative Lists Widen Market Access for Foreign Investment

On December 27, 2021, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) jointly issued two “negative lists”, both of which will take effect on January 1, 2022. This is a move to further open China’s market to foreign investors and promote high-quality development.

The two Negative Lists refer to the Special Administrative Measures on Access to Foreign Investment (2021 edition) (“2021 National Negative List”) (full list in Chinese available2021 National Negative List) and the Free Trade Zone Special Administrative Measures on Access to Foreign Investment (2021 edition) (“2021 FTZ Negative List”) (full list in Chinese available 2021 FTZ Negative List), which will replace their respective 2020 versions.

These two negative lists enumerate the industries where foreign investment will either be prohibited or restricted.

What is the latest reduction in restrictive/prohibitive measures affecting foreign investment?

For five years in a row, the two new negative lists have continued to reduce the number of measures limiting access to foreign investment.

Compared with the 2020 negative lists, the new 2021 National Negative List has cut the number of restrictive items by 6.1 percent from 33 to 31, and the new 2021 FTZ Negative List has cut the restrictive items by 10 percent from 30 to 27.

Further opening-up of the manufacturing sector

In the field of automobile manufacturing, the restriction on the share ratio of foreign investment in passenger car manufacturing and the restriction that the same foreign investor can establish two or fewer joint ventures in China to manufacture the same types of vehicles are liberalized.

In the field of radio and television equipment manufacturing, the restrictions on foreign investment in satellite television broadcasting ground receiving facilities and the production of key components shall be removed, and foreign investors shall play on a leveled ground with domestic investors.

After this revision, the manufacturing sectors in the Pilot Free Trade Zone will be subject to zero restrictions.

Further relaxing of service sectors in the FTZs

In the field of market research, except for radio and television rating surveys that must be controlled by the Chinese party, restrictions on foreign investment access will be lifted.

In the field of social surveys, foreign investors are allowed to invest in this sector, but the Chinese shareholding ratio is required to be no less than 67%, and the legal representative should have Chinese nationality.

More detailed explanatory notes

In the explanatory notes of the negative lists, it clarified that: overseas IPOs of domestic enterprises engaged in businesses in the areas prohibited for foreign investment as stipulated in the negative lists must be examined and approved by the relevant government departments.

Foreign investors shall not participate in the operation and management of these enterprises, and their shareholding ratio shall be governed by reference to the relevant regulations on the management of domestic securities investment by foreign investors.

China’s securities regulators and relevant authorities will implement precise management of overseas listing and financing of these domestic enterprises.

To be consistent with the “Regulations for the Implementation of the Foreign Investment Law,” the explanatory of the Negative Lists added that foreign-invested enterprises shall comply with the relevant provisions of the Negative Lists for investing in China.

In order to properly link the Negative Lists and the Negative List for Market Access, the explanatory notes added that the “Foreign and domestic investors shall uniformly apply the relevant provisions of the Negative List for Market Access”.

Source: Xinhua