Longitudinal and Parallel Comparisons of the Negative Lists for Foreign Investment

On the last day of June in 2019, the National Development and Reform
Commission and the Ministry of Commerce jointly promulgated the Special
Administrative Measures (Negative List) for Foreign Investment Access (Edition
2019)
(“National List”) and the Special Administrative Measures
(Negative List) for Foreign Investment Access in Pilot Free Trade Zones (2019
Version)
(“FTZ List”) simultaneously, both of which will be
implemented starting from July 30, 2019. 
It is worth mentioning that the length of both lists has been further
cut down based on their 2018 editions, with the items under the National List
being reduced from 48 to 40 and the items under the FTZ List being reduced from
45 to 37. 

 

In addition, the encouraged industry list under the Catalogue of
Industries for Guiding Foreign Investment (Revision 2017)
and the Catalogue
of Priority Industries for Foreign Investment in Central and Western China
(Revision 2017)
have been replaced by the Catalogue of Encouraged
Industries for Foreign Investment (Edition 2019)
.  Compared with the two simplified negative
lists, the encouraged industry catalogue of 2019 has increased items to
encourage foreign investment in almost all industries.

 

In order to assist
foreign investors and those who are interested in cross border investment to get
a clearer picture of the differences between Edition 2019 of the two lists and
their Edition 2018, we have made two longitudinal comparisons.  Meanwhile, to further assist foreign
investors to understand the differences between foreign investment access in
and out of the free trade zones, we have also made a comparison between the National
List and the FTZ List which aims to enable producers or traders to choose
suitable registration places depending on their business needs.

 

1. Longitudinal Comparison of the National Lists

 

 

Compared with the National
List Edition 2018, the Edition 2019 has repealed all foreign investment access restrictions
in seven sub-sectors of five industries, including mining, manufacturing, transportation,
warehousing and postal services, water, environment and public facilities
management, culture, sports and entertainment with details set forth below:

 

Industry

2018

2019

Mining

The
exploration and development of oil and natural gas (excluding coalbed
methane, oil shale, oil sands, shale gas, etc.) are limited to joint ventures
and cooperation.

Repealed

It
is prohibited to invest in exploration and mining of molybdenum, tin,
antimony, and fluorite.

Repealed

Manufacturing

It
is prohibited to invest in the production of Xuan paper and ink sticks.

Repealed

Transportation,
warehousing and postal services

Domestic
shipping agencies must be controlled by the Chinese side.

Repealed

Water,
environment and public facilities management

It
is prohibited to invest in the development of wild animal and plant resources
protected by the country that are originating in China

Repealed

Culture,
sports and entertainment

The
construction and operation of the cinema must be controlled by the Chinese
side.

Repealed

Performance
brokers must be controlled by the Chinese side.

Repealed

 

2. Longitudinal Comparison of the FTZ Lists

 

Compared with FTZ List Edition
2018, the Edition 2019 has repealed any and all foreign investment access restrictions
in 7 sub-sectors of six industries including agriculture, forestry, husbandry
and fishery, mining, manufacturing, transportation, warehousing and postal
services, water, environment and public facilities management, culture, sports
and entertainment with details set forth below:

 

Industry

2018

2019

Agriculture,
forestry, husbandry and fishery

Investment
in aquatic product fishing in China and within China territorial waters shall
be prohibited.

Repealed

Mining

Investment
in exploration and mining of molybdenum, tin, antimony and fluorite shall be
prohibited.

Repealed

Manufacturing

The
Chinese party of printers of publications shall hold the controlling stake.

Repealed

Investment
in manufacturing of Xuan paper and ink ingot shall be prohibited.

Repealed

Transportation,
warehousing and postal services

The
controlling stake of domestic shipping agencies shall be held by the Chinese
party.

Repealed

Water,
environment and public facilities management

Investment
in development of State-protected wild animal and plant resources originated in
China shall be prohibited.

Repealed

Culture,
sports and entertainment

The
controlling stake for construction and operation of movie theatres shall be
held by the Chinese party. (Screening of movies shall comply with the time
ratio for domestic films and imported films stipulated by the Chinese
Government. The time for screening of domestic films annually of a movie
theatre shall not be less than two-thirds of the total time for screening of
movies annually of the movie theatre.)

Repealed

 

3. Parallel Comparison of the National List and the FTZ
List

 

As mentioned above,
compared with Edition 2018, both the National List and the FTZ List have been “simplified
greatly”.  However, except for those two
sub-sectors of the agriculture, forestry, husbandry and fishery, and manufacturing
industries for which the foreign investment access restrictions (on development
of State-protected wild animal and plant resources originated in China and printing
of publications) have been repealed under the two Edition 2019 lists, the
differences between the two Edition 2019 lists are almost the same as those
between the two Edition 2018 lists.

 

Industry

National
List

FTZ
List

New
Difference

I. Agriculture,
forestry, animal husbandry and fishery

The
selection and breeding of new varieties of wheat and corn, and seed
production must be controlled by the Chinese side.

Chinese
party shareholding in new variety breeding and seed production of wheat and
maize shall not be less than 34%.

No

It
is prohibited to invest in the fishing of aquatic products in sea and inland
waters under China’s jurisdiction.

Repealed

Yes

II.
Mining

It
is prohibited to invest in exploration, mining and beneficiation of rare
earth,
radioactive minerals, and tungsten.

It
is prohibited to invest in exploration, mining and beneficiation of rare
earth, radioactive minerals, and tungsten.
(Without permission, no person shall
be allowed to enter rare earth mines or obtain mine geology information, ore
samples and production technology.)

No

III.
Manufacturing

The
printing of publications must be controlled by the Chinese side.

Repealed

Yes

It
is prohibited to invest in the smelting and processing of radioactive
minerals, or production of nuclear fuel.

No restriction

No

VI. Transportation,
warehousing and postal services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic
water transportation companies must be controlled by the Chinese side.

Domestic
water transportation companies must be controlled by the Chinese side. (Foreign investors shall not
operate, or operate through disguised lease of Chinese vessels or berths
etc., China domestic waterway transport business and auxiliary businesses
thereof; water transport business operators shall not use foreign vessel(s)
to operate domestic water transport business however if upon approval by the
Chinese government where there is no Chinese vessel in China which can
satisfy the transportation requirements, and the port or waters where the
vessel is docked is opened to foreign vessels, the water transport business
operator may use foreign vessel(s) temporarily within the term or voyage
stipulated by the Chinese Government to undertake marine transport and towing
between Chinese ports.)

No

The
public air transport company must be controlled by the Chinese side, and the
investment ratio of a foreign company and its affiliates must not exceed 25%.
The legal representative must be a citizen of Chinese nationality.

The
controlling stake in public aviation enterprises shall be held by the Chinese
party, and the investment ratio of a foreign investor and its associates shall
not exceed 25%. The legal representative shall be a Chinese citizen. (Only China designated public
aviation enterprises can operate domestic aviation business, and provide
regular and ad hoc international aviation services in the capacity of a China
designated carrier.)

No

It
is prohibited to invest in postal companies and domestic express delivery
services.

Investment
in postal enterprises (and
operation of postal services)
and domestic express mail business shall
be prohibited.

No

VII.
Information transmission, software and information technology services

Telecommunications
companies: the telecommunication services are limited to those promised at
China’s WTO accession, and foreign-invested shares of value-added
telecommunications services must not exceed 50% (excluding e-commerce,
domestic multi-party communication,store-and-forward business, call center);
the basic telecommunications services must be controlled by the Chinese side.

Telecommunications
companies: limited to telecommunications services opened up pursuant to
China’s WTO commitments; the foreign investment ratio for value-add
telecommunications services (except for e-commerce, , domestic multi-party
communication,store-and-forward business, call center) shall not exceed 50%;
the controlling stake of operators of basic telecommunications businesses
shall be held by the Chinese party (and the operators shall be telecommunications companies established
pursuant to the law to engage specifically in basic telecommunications
businesses). The pilot scheme policies of the Shanghai Pilot Free Trade
Zone’s original territory (28.8 square kilometers) shall be extended to all
pilot FTZs.

No

XI.
Education

 

 

 

 

 

 

 

 

 

 

Preschool,
ordinary high school and higher education institutions are limited to
Sino-foreign cooperative education, and must be led by the Chinese side (The
principal or chief administrative officer shall have Chinese nationality, and
Chinese members of the council, board of directors or joint management
committee shall be no less than than 1/2).

Pre-school,
ordinary high school and higher education institutions shall be limited to
the form of Sino-foreign cooperative joint venture and led by the Chinese
party (the principal or the key person-in-charge of administration shall be a
Chinese national (and based in China); Chinese members shall comprise no less
than half of the council, board of directors or joint administrative
committee. (Foreign
education institutions, other organizations or individuals shall not solely
establish schools or any other educational institutions whose enrolment
targets are mainly Chinese citizens (excluding non-academic vocational skills
training), however, foreign educational institutions may cooperate with a
Chinese educational institution to jointly establish educational institutions
whose enrolment targets are mainly Chinese citizens).

No

XIII.
Culture, sports and entertainment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment
in news institutions (including but not limited to news agencies) is
prohibited.

Investment
in establishment of news organizations (including but not limited to news
agencies) shall be prohibited. (Establishment of resident news agency in China and assignment of
permanent correspondents to China by foreign news organizations shall be
subject to approval by the Chinese Government. Provision of news services by
foreign news agencies in China shall be subject to examination and approval
by the Chinese Government. Business cooperation between Chinese and foreign
new organizations shall be led by the Chinese party, and shall be subject to
approval by the Chinese Government.)

No

It
is prohibited to invest in the editing, publishing and production of books,
newspapers, periodicals, audio-visual products and electronic publications.

Investment
and operation of editing, publication and production of books, newspapers,
periodicals, audio-visual products and electronic publications shall be
prohibited. (However,
subject to approval by the Chinese Government, provided that the Chinese
cooperative party holds the operating dominance rights and the rights to
final examination of contents, and that the parties satisfy other criteria
such as compliance with approval reply of the Chinese Government, a
Sino-foreign publisher may engage in Sino-foreign cooperative news publishing
projects. Without approval by the Chinese Government, provision of financial
information in China shall be prohibited.)

No

It
is prohibited to invest in broadcasting stations, television stations, radio
and television channels (frequencies), radio and television transmission
coverage networks (transmission stations, relay stations, radio and
television satellites, satellite uplink stations, satellite retransmission
stations, microwave stations, monitoring stations and cable radio and
television transmission coverage networks, etc.) at all levels. It is
prohibited to engage in installation services for on demand services for
broadcast television videos and ground reception facilities for satellite
television broadcasting.

Investment
in establishment and operation of all levels of radio stations, television
stations, radio and television channel (frequency), radio and television
transmission coverage networks (including transmitters and relay stations,
radio and television satellites, satellite up-stations, satellite
transmission stations, microwave stations, monitoring stations, cable radio
and television transmission coverage networks etc.) shall be prohibited, and
engaging in radio and television video on demand services and satellite
television ground receiving facilities installation services shall be
prohibited. (Landing of
overseas satellite channels shall be subject to examination and approval.)

No

It
is prohibited to invest in the production and operation of broadcasting and
television programs (including the introduction of businesses).

Investment
in radio and television program production and operation (including
introduction of business) enterprises shall be prohibited. (Introduction of overseas
television programs and introduction of other overseas television programs
via satellite transmission shall be declared by units designated by the State
Administration of Press, Publication, Radio, Film and Television.
Sino-foreign cooperative production of television series (including
television animation) shall be subject to licensing.)

No

It
is prohibited to invest in film production companies, distribution companies,
cinema companies, and film import business.

Investment
in film production companies, distribution companies and cinema companies as
well as film introduction business shall be prohibited. (However, upon approval,
foreign enterprises are allowed to produce films with Chinese enterprises.)

No

It
is prohibited to invest in the auction companies for cultural relics, stores
for cultural relics, and state-owned cultural relics museums.

Investment
in auction companies, cultural relics stores and state-owned cultural relics
museums engaging in auction of cultural relics shall be prohibited. (Transfer, mortgage and
renting of immovable cultural relics and cultural relics prohibited to be
brought out of China to foreigners shall be prohibited. Establishment and
operation of intangible cultural heritage investigation organizations shall
be prohibited; intangible cultural heritage surveys and archaeological
investigation, exploration and excavation in China by overseas organizations
or individuals shall adopt the form of cooperation with China and be subject
to special examination and approval and licensing.)

No

It
is prohibited to invest in performing arts groups.

The
controlling stake of performing arts groups shall be held by Chinese party.

No

 

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