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China's foreign investment Law | 2020 "Negative List"

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page WOFE en chine
| China updated its regulations on foreign investments |
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updated on
14 May 2020
 
 
 
 
 
 

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Since China's laws and regulations allowed foreign investments in China, the "foreign investments catalogue" which was regularly updated, has divided investment categories into four categories: encouraged, permitted, restricted and prohibited.

Foreign investments shall be subject to official approval after examination of the investment feasibility report.

Then, investors can apply for a "business license" to achieve the company's legal creation and obtain other required licenses or certificates according to the specific requirements in the target sector. After China joined the WTO in December 2001, the previous versions of the catalogue were published in 2004, 2007, 2011, 2015 and 2017.

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  Liste négative des investissements étrangers en Chine

In June 2018, the National Development and Reform Commission and the Commerce Commission jointly published a new “Catalogue of negative list of foreign investments in China” (hereinafter referred to as the "negative list"). This list has replaced the previous "foreign investments catalogue" since the 28th July 2018.

The Negative list indicates the activities restricted or prohibited to foreigners

  • Sectors listed as "restricted" or "prohibited" in the negative list are either off-limits to foreign investors or subject to specific restrictions (for example, the requirement to create a sino-foreign joint venture with a foreign minority or majority stake).

  • Sectors not listed in the "negative list" are considered "allowed" in principle. In this case, it will be allowed to create a subsidiary WOFE (wholly owned foreign enterprise).

In June 2019, the national development and Reform Commission and the Commerce Commission updated the negative list. This updated version is still in effect in China in 2020.

In this revision, the number of activities with special restrictions has been reduced from 48 to 40, and the differences between the versions in 2018 and 2020 are listed in the table below:

Sectors

Activity

2018 regulation

2020

Transportation

Establishment of a shipping agency

Restricted

(a Chinese investor must hold at least 50% of the shares)

Permitted

Heat & electricity energy, natural gas and water

Installation and operation of urban networks / fuel gas and thermal infrastructure

Restricted

(a Chinese investor must hold at least 50% of the shares)

Permitted

Culture

Establishment and operation of cinemas

Restricted

(a Chinese investor must hold at least 50% of the shares)

Permitted

Brokering agency for stage performances

Restricted

(a Chinese investor must hold at least 50% of the shares)

 Permitted

Value added telecom

Operators engaged in the activities of:
1.  Call center 
2.  Multi-user communication
3.  Store & send transmission

Restricted

(a Chinese investor must hold at least 50% of the shares)

Permitted

Mining industry

Exploration and development of petroleum and natural gas

Restricted

(JV or cooperation)

Permitted

Exploration and development of molybdenum, tin, antimony and fluorite.

Prohibited

Permitted

manufacturing industry

Chinese paper and ink stick manufacturing

Prohibited

Permitted

Water conservancy and environmental facilities

Development of wild animal and plant resources native to China protected by the state

Prohibited

Permitted

 

However, China's control on foreign investments is still very strict in some sectors, especially in the fields of education, health and culture, such as:

  • Production and TV programs broadcastig (prohibited)            
  • Edition, production and publication of audio-visual materials (prohibited)
  • Legal consulting regarding Chinese law (Prohibited)            
  • Tobacco wholesale and retail (prohibited)
  • Establishment of Higher Education institutions (restricted)            
  • Establishment of medical institutions, hospitals + clinics (restricted)


Our insight on the new "Negative List" of foreign investment in China:

The update of the negative list shows that China generally hopes for a greater opening and is willing to provide more opportunities for foreign investors by reducing the restrictions. The latest version of the list aims to inspire investment projects that bring new knowledge, methods and technologies to China.

Although the new catalogue of negative list is updated, further clarifications and explanations are still needed. The Chinese provincial or municipal authorities shall explain – case by case according to each project submitted - the specific approval conditions of these projects, especially:

  • Scope of activities permitted in the business scope
  • Minimum capital requirements related to the investment scale
  • Other possible special requirements (special permit, etc.)

So far, most foreign investment projects in China, which have been examined according to the previous catalogue, were approved in the forms of:


 



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