China Expands Access To Free Trade Zones For Foreign Investors
The new version of the negative list regulating access of foreign investment to the Chinese market and Free Trade Zones (FTZ) of the PRC came into force on Thursday. Simplifying investor access is aimed at further enhancing China's openness, as well as improving business conditions in the face of a pandemic.
The negative list is a list of activities that are partially restricted or prohibited for foreign companies or enterprises with foreign capital in China. It includes two separate lists: the national negative list of China and the Negative list for China's free trade zones. In the updated version of the first list, the number of industries with restrictions for foreign investors is reduced from 40 to 33, and in the new version of the list for free trade zones - from 37 to 30.
In the new versions of 2020, certain areas have been completely removed, meaning there are no restrictions for foreign investors. In some areas that remain on the negative list, clarifications, allowances, and exceptions have been made.
Changes in the National negative list increase the level of openness of the Chinese market in services, manufacturing, and agriculture. For example, since July 23, foreign investors are allowed to acquire controlling stakes in joint ventures engaged in the construction and operation of water supply and sanitation systems in Chinese cities with a population of more than 500 thousand people. Another example of relief is the increase in the share of foreign capital to 66% in enterprises involved in wheat breeding and seed production.
Negative List for the FTA
As for free trade zones, the China Daily newspaper writes on Thursday, the new version of the negative list "will strengthen the role of the FTA as a driver of China's openness." The changes affected the sphere of medicine, education, and other areas. For example, the ban on foreign investment in the production of ready-to-use traditional Chinese medicine (TCM), as well as the production of components for TCM products, which was in effect in the 2019 edition, was lifted.
In the field of education, industrial and technical educational institutions have been eased. While the 2019 version of the list for the FTA allowed only joint management of these institutions, the 2020 version allows foreign investors to independently create and manage industrial and technical educational institutions, however, if their main goal is to recruit mainly Chinese citizens.
Changes also affected the financial sector. For example, restrictions on the 51% share of foreign capital in investment funds and their management companies, as well as life insurance companies and others that were in effect last year have been lifted.
According to a statement published on the website of the Ministry of Commerce of China, "after the tests caused by the pandemic, investors from different countries will be even more convinced that the pace of promoting China's openness has not slowed down, that China's policy to attract foreign investment has not changed, and that China will continue to provide better conditions for foreign investors who invest in the Chinese market."