China’s 2020 Negative List for Foreign Investment Takes Effect
China’s newly revised Special Administrative Measures on Access to Foreign Investment (2020 Version) (2020 National Negative List) and Free Trade Zone Special Administrative Measures on Access to Foreign Investment (2020 Version) (2020 FTZ Negative List) have taken effect on 23 July 2020. This is the fourth year in a row since 2017 that China has revised the negative list for foreign investment.
China has further shortened the negative lists for foreign investment this year. The prohibited or restricted industries on the 2020 National Negative List have been cut from 40 to 33, while the items on the 2020 FTZ Negative List have been cut from 37 to 30. The 2020 National Negative List further improves the level of openness in the service, manufacturing and agricultural sectors. The main changes are as follows:
- Finance Sector
The foreign ownership caps on securities, securities investment fund management, futures and life insurance companies have been removed. Foreign investors can now fully own the above finance sector companies.
- Infrastructure Sector
Foreign investors have been allowed to take majority shares in joint ventures that engage in the building and operation of water supply and drainage networks in cities with a population of more than 500,000.
- Transportation Sector
The previous prohibition on foreign investment in air traffic control has been canceled. But foreign investors may not participate in the construction and operation of the airport tower.
- Manufacturing Sector
The foreign ownership caps on commercial vehicle manufacturing have be removed. The restriction on the shareholding percentage of foreign investors in the manufacturing of passenger cars and the restriction that one foreign investor may establish two or less joint ventures in China to manufacture the same type of vehicles will be removed in 2022. Prohibition on foreign investment in the smelting and processing of radioactive minerals and nuclear fuel production also have been eliminated.
- Agricultural Sector
The selection and breeding of new wheat varieties and the production of the seeds are no longer required to be controlled by the Chinese party. The ownership limit on foreign investors has been raised up to 66%.
- FTZs
In the medicine sector of FZTs, prohibition on foreign investment in ready-to-use traditional Chinese medicine has been eliminated. In the education sector of FZTs, foreign investors are allowed to establish wholly owned vocational education institutions.
- Exemptions
Exemptions have been added to the new negative lists. Upon review by the competent government authorities and approval by the State Council of the PRC, the provisions of the two negative lists may not apply to specific foreign investments. This provision has retained flexibility for foreign investment in particular forms or sectors
With the implementation of China’s new shorten negative list for foreign investment, more and more foreign investors may be attracted to China. This will not only promote the high quality development of China’s economic but also contribute to the vitality of the global economy.
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