CHINA: Government issues revised negative list for China foreign investment

Thursday July 17 2014

The Shanghai Municipal People`s Government has published a Revised Negative List for China foreign investment in the new Shanghai Free Trade Zone.

This updates the 2013 version with immediate effect. It adopts the same mechanism as before whereby it lists the industry sectors in which foreign investment is restricted or prohibited but with a shortened list of industry sectors.

Sectors included on the Revised Negative List have been reduced from 190 to 139.

The most significant amendments can be seen in the industries of manufacturing, transportation, real estate, wholesale and retail.

Restrictions on foreign investment have been removed in 14 sectors, including:

• Development of areas of land
• Operation of premises to provide Internet access
• Railway cargo transport companies
• Cotton processing
• Paper manufacturing
• Production of benzedrine, dyes and coatings
• Production of chemical medicines including chloramphenicol, penicillin G, gentamicin and multiple vitamins preparations
• Smelting of non-ferrous metals (e.g., electrolytic aluminium, copper, lead, zinc) and
• Wholesale, retail and distribution of vegetable oil and sugar.

Certain restrictions on foreign investment have been relaxed in 19 sectors. For instance:

• Foreign investors are no longer required to form equity joint ventures with Chinese firms to pursue research, development and manufacturing of automobile electronics, automobile electronic bus-networking technology and electronic controllers for power steering systems.

• The maximum 30-year cap on the business term for any foreign-invested company providing air transportation auxiliary services is now lifted.

• Clarification that foreign investors can set up project companies to trade in the real estate secondary market.

• Removal of the requirements on the minimum amount of total investment and the maximum number of years of business term for a foreign-invested medical institution.

Restrictions in certain “sensitive” industry sectors, such as telecommunication and finance, remain unchanged.