China Removes 27 Restrictions on Foreign Investment in the FTZ

Published on 2017-07-12

State Council updated its foreign investment negative list for China’s 11 free trade zones (FTZs), including the seven new FTZs launched earlier this year.

The updated negative list (2017 List), effective from 10 July 2017, lifts restrictions across various manufacturing, information services, transportation, commercial services and finance industries. 

On 5 June 2017, the State Council issued the Special Administrative Measures (Negative List) for Foreign Investment Access to Pilot Free Trade Zones (2017). The 2017 List shows effort by the Chinese authorities to combine and streamline all restrictions on foreign investment and on the operation of foreign-invested businesses into a single, consolidated list.

The 2017 List will replace the 2015 edition and removes 10 items and 27 special administrative restrictions across more than 20 industries. In doing so, it presents new opportunities through the FTZs for prospective British and other foreign investors seeking to enter the Chinese market, and signals central government’s desire to continue opening up the Chinese economy.

Highlights of the 2017 List from the perspective of the British Chambers’ Focus Groups include:

  • On the manufacturing front, manufacturers of rail transportation equipment and civilian satellites will no longer be obligated to enter into a joint venture with a Chinese partner or sign over a majority stake to a Chinese firm in order to operate in a free trade zone. In addition, newly-established foreign makers of pure electric passenger vehicles will no longer be required to have their own brand, intellectual property or authorised patents for their products.
  • For financial services, rules that have in the past prohibited foreign banks from underwriting Chinese government bonds are eased. Insurance, accounting and auditing and other commercial services will also see a cut-back on their respective investment restrictions.
  • The entertainment and leisure sectors have also seen some relaxation. For example, the establishment of large theme park is now permitted for foreign investors.

Where an industry has been taken off the 2017 List, this does not necessarily mean that a foreign entity is free to invest in its desired industry. A foreign enterprise must still comply with the relevant investment regulations and other requirements prescribed by the regulator(s) supervising its desired industry, in the same way that those requirements apply to domestic entities. However, the 2017 List should nonetheless be seen as another positive step in China’s economic liberalisation. 

Contributor:

*This article was written for The British Chamber of Commerce Shanghai by Linklaters.