China business: market-entry ‘Negative List’ updated

On 25 December 2018, China’s National Development and Reform Committee (NDRC) released its Negative List for Market Access (2018 Version). The Negative List is a list of industries in which foreign investment is either prohibited or restricted. The list’s objective is to ease market access for foreign investment by relaxing or removing restrictions; it applies across the Chinese mainland and overrides all related local government regulations. The newly updated Negative List is the first unified table applicable to both domestic and foreign companies.

Originally, the Negative List was piloted in 2016 across several Chinese cities, including Shanghai, Tianjin, Fujian and Guangdong, before expanding to 11 more provincial regions in 2017.

The pilot Negative List’s simplified procedures related to the establishment, amendment, equity transfer and other related matters for foreign investment entities (FIE) in industries outside the Negative List. Instead of the previous case-by-case approval system, FIEs outside of the Negative List were subjected to a record-filling administration (see the previous post on the Negative List).

In comparison to the 2016 Negative List, the 2018 version removes 177 items and 288 specific management measures from the 2016 version. Below is an abbreviated listing of key approved and prohibited industries.

Key approved industries

  • agriculture
  • utilities
  • construction
  • wholesale and retail trade
  • transportation, warehousing and postal services
  • financial
  • accommodation
  • information technology and software
  • scientific research
  • environmental
  • education
  • health
  • sports
  • culture
  • entertainment industries

Key prohibited industries

  • Industries prohibited in participation according to the laws of the People’s Republic of China
  • Projects prohibited under the Catalogue for Guiding Industry Restructuring
  • Illegal financial activities
  • Illegal internet-related business activities

For FIEs, the 2018 Negative List should be analysed in conjunction with the Special Administrative Measures on Access to Foreign Investment (2018 FI Negative List) released by the Ministry of Commerce (MOC) in July 2018. The 2018 FI Negative List outlines the ownership structure for restricted industries, as well as prohibited industries for foreign investment, whereas the 2018 Negative List establishes specific procedures such as obtainment of license or certificates for both domestic and foreign companies within the approved industries.

The 2018 Negative List and the recent promulgation of the Draft Foreign Investment Law on 26 December 2018 reflect further steps to lift the restriction on foreign investment. Specifically, the adoption of a national Negative List for both foreign and domestic companies is a positive sign for a more unified market access system.

If you would like more information about the ‘Negative List’ in China or other related corporate matters, send us an email at talktous@horizons-advisory.com, and we’ll have a Horizons professional contact you.

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