China’s Foreign Investment Law and Updated Investment Negative List: New Opportunities for Foreign Investment in China | Womble Bond Dickinson

On December 27, 2021, China’s National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) printed an up-to-date Destructive Checklist for international investment in China (the “2021 Negative List”).  The 2021 Adverse Listing decreases the number of limited or prohibited sectors from 33 to 31 and allows international buyers to kind wholly international-owned enterprises for motor vehicle producing, such as specific goal automobiles, new-strength vehicles, commercial autos, and passenger autos. It also removes the restriction in relationship with expense in the producing of satellite tv broadcast ground acquiring services.  In addition, the 2021 Negative Checklist now requires any Chinese domestic firms in corporations prohibited by the Destructive Listing to acquire appropriate authorities approval in advance of pursuing an IPO outdoors of China.  

Below the 2021 Destructive List, there are at the moment 31 limited and prohibited industries in China for foreign financial commitment: 

  1. Limited: the domestic Chinese bash shall have at minimum 34{3e92bdb61ecc35f2999ee2a63f1e687c788772421b16b0136989bbb6b4e89b73} of a business in the business enterprise of choice and cultivation of new types of, and production of the seeds of, wheat.  Company in the organization of selection and cultivation of new types of, and creation of seeds of, corn, need to be managed by a domestic Chinese occasion.
  2. Prohibited: exploration, advancement, breeding and planting of China’s unusual and exceptional cherished high quality kinds and the generation of suitable breeding products (such as top quality genes of planting, animal husbandry and aquaculture).
  3. Prohibited: assortment of genetically modified kinds and the creation of genetically modified seeds (fingerlings) in relationship with crops, breeding inventory and poultry, and aquatic fingerlings is prohibited.
  4. Prohibited: fishing for aquatic merchandise in sea places in just Chinese jurisdiction and China’s inland waters 
  5. Prohibited: uncommon earths, and the reconnaissance, mining and beneficiation of radioactive minerals and tungsten 
  6. Limited: Expense into publication organization must be controlled by a domestic Chinese occasion.
  7. Prohibited: Application of steaming, stir-frying, burning, calcination and other processing systems of Chinese medicine and the manufacturing of private prescription merchandise for proprietary Chinese medications.
  8. Restricted: Design and operation of nuclear electrical power plant shall be controlled by a domestic Chinese occasion.
  9. Prohibited: wholesale and retail of leaf tobacco, cigarettes, re-dried leaf tobacco and other tobacco goods.
  10. Restricted: Domestic waterborne transportation providers shall be controlled by Chinese functions.
  11. Restricted: A community airline transportation corporation should be controlled by a domestic Chinese party, and the financial commitment designed by a solitary foreign investor together with its associated-bash enterprises in this kind of enterprise shall not exceed 25{3e92bdb61ecc35f2999ee2a63f1e687c788772421b16b0136989bbb6b4e89b73}, and this kind of company’s lawful representative need to be a Chinese citizen. Lawful agent of typical aviation organizations must be a Chinese citizen, of which, people for the agriculture, forestry and fishery industries are limited to joint ventures only, although some others shall be managed by Chinese events.
  12. Restricted: expense in the building and procedure of civil airports ought to be controlled by a Chinese get together. Foreign functions are not allowed to participate in the construction and procedure of airport towers.
  13. Prohibited: postal services and the enterprise of domestic  mail supply service 
  14. Limited: Telecommunications providers – subject to China’s WTO accession commitments the shareholding ratio of foreign expenditure in a value-included telecommunications business (excluding e-commerce small business, domestic multi-social gathering communications, shop-and-ahead and connect with facilities) shall not exceed 50{3e92bdb61ecc35f2999ee2a63f1e687c788772421b16b0136989bbb6b4e89b73} the simple telecommunication small business must be controlled by the Chinese get together.
  15. Prohibited:  internet information providers, on the internet publishing expert services, on-line audio-visible plan products and services, world wide web society operation (excluding music), and world-wide-web general public-oriented facts releasing services (excluding companies that is permitted beneath China’s WTO accession commitments). 
  16. Prohibited: Chinese lawful company (except for giving information relating to the impacts of China’s lawful environment) starting to be the lover of a domestic regulation office environment. 
  17. Restricted: industry surveys organization is limited to joint ventures broadcasting and television listening and rating surveys must be managed by a domestic Chinese celebration.
  18. Prohibited: social surveys.
  19. Prohibited: advancement and application of technologies of human stem mobile and gene analysis and treatment method. 
  20. Prohibited: humanistic and social science investigate establishments. 
  21. Prohibited: geodetic surveying, hydrographic surveying and charting, surveying and mapping through aerial pictures, ground mobile surveying, surveying and mapping of administrative region borders, compiling of topographical maps, environment administrative maps, national administrative maps, administrative maps at the provincial degree or under, countrywide faculty maps, area faculty maps and true 3-dimensional maps, compiling of navigation digital maps and regional investigations in terms of geological mapping, mineral geology, geophysics, geochemistry, hydrogeology, environmental geology, geological disasters and remote sensing geology (Mining ideal proprietors performing in the scope of their mining rights will not be topic to this exclusive administrative evaluate).
  22. Limited: pre-university establishments, senior higher educational facilities and establishments of increased instruction shall be jointly run by China-overseas entities this kind of educational institutions need to be dominated by the Chinese get-togethers (principals or main administration heads in charge of this sort of colleges shall be of Chinese nationality, and Chinese customers shall constitute at minimum half of the council, board of directors or joint administration committee).
  23. Prohibited: Obligatory education institutions and religious education and learning establishments. 
  24. Limited: Financial commitment in healthcare establishments shall be limited to joint ventures.
  25. Prohibited: news agencies (together with but not restricted to push organizations). 
  26. Prohibited: enhancing, publishing and manufacturing of guides, newspapers, periodicals, audio-visible merchandise and digital publications. 
  27. Prohibited:  all degrees of broadcasting stations, television stations, radio and television channel and frequency, radio and tv transmission networks (including radiating stations, rebroadcasting stations, broadcasting and Tv satellites, satellite uplink stations, satellite sign acquiring and rebroadcasting stations, microwave stations, monitoring stations and cable broadcasting and television transmission network, etcetera.) and engagement in the movie on demand small business of radio and Tv set and in the provision of solutions of installation of the floor getting services for satellite tv broadcasting. 
  28. Prohibited: radio and tv program output and procedure (which includes introduction). 
  29. Prohibited: movie creation companies, distribution providers, cinema companies and the introduction of movies.
  30. Prohibited: offering cultural relics by auction, cultural relic stores and state-owned cultural relic museums. 
  31. Prohibited: cultural and inventive overall performance teams.

International expenditure in sectors not incorporated on the 2021 Detrimental Record are subject matter to the very same administrative approval demands as Chinese domestic investments.

NDRC and MOFCOM also retain a different No cost Trade Zone Adverse Checklist which is only relevant to overseas investment decision in specified Free Trade Zones. 

In accordance to a latest report geared up by the US Worldwide Trade Administration, in spite of the raising geopolitical tensions in between the US and China, the vast size of the market place, the continued expansion of the middle and higher class, modifying demographics, and the extended economic transformation of China, carry on to create market alternatives for effectively-organized U.S. businesses and American products continue on to be seen favorably by Chinese individuals. Notably, the Global Trade Administration has recognized the pursuing market sectors as the top sectors for US exports and investments: agriculture, aviation, automotive (such as recreational vehicles and motorcycles), cosmetics and toiletries, structure and construction products and services, instruction, electricity (like thoroughly clean technologies, organic gas, power successful production, carbon capture, utilization, and storage, and inexperienced creating (a wide notion of environmental helpful building processes and technology)) environmental technological know-how, and health care (which include healthcare gadgets, diagnostic imaging, implants, in-vitro diagnostics, and orthopedics). 

Using benefit of these alternatives without good practical experience (information of nearby legislation and polices) or sources (like language capacity and cross cultural conversation capabilities) can be hard.  Therefore, it is crucial to perform with specialists with China expertise to support you discover and make the most of the broad sector opportunities that exist in China.  

Maria Flores

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