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New negative list to further encourage foreign investment

Updated: Jul 09,2019 07:28 PM

A new negative list for foreign investment prior to entry in China is cutting the number of prohibited sectors and subsectors to 40 from 190 in 2013, the fifth time the list has been shortened in the last six years.

Called the Special Administrative Measures (Negative list) for Access of Foreign Investment (2019 Revision), the list was published by the National Development and Reform Commission on June 30 and will be implemented on July 30.

The new revision is aimed at easing curbs on foreign investment and widening access for foreign investment to agriculture, mining, manufacturing and service industries.

Any foreign market entity that’s not on the list can enter the country’s market on an equal footing with Chinese firms, a principle being strictly implemented by the Ministry of Commerce.

MOFCOM is eliminating all restrictions other than those on the negative list and will continue to simplify the approval process for foreign-invested enterprises and delegate the power of approval to lower-level governments, said Tang Wenhong, head of the Department of Foreign Investment Administration at MOFCOM.

China shortened the negative list last year, easing curbs on 22 sectors including automobiles, general aviation, banking, securities and insurance. The number then shrank to 48, with three-fourths of 2011’s list canceled.

Meng Wei, spokesman for the NDRC, said the negative list is intended to simplify instead of adding extra rules. He noted the country is looking to completely cancel all restrictive rules not on the negative list before 2019 ends, and will implement more encouraging measures for industries where foreign investment has flown, especially in central and western China. Services for major foreign-funded projects will be continued.

The international community is paying close attention to the release of the negative list. Reuters commented on the move, saying China never stalls on its way to further open up. United Press International said this marks a significant change amid China’s reform on key industries, for which it will allow more foreign investment to come in.

Since the 19th National Congress of the CPC, China has been implementing policies of high-quality development to liberalize and facilitate investment, in efforts to build up all-around opening-up.

According to a recent report from the United Nations Conference on Trade and Development, cross-border direct investment global-wise has fallen for three consecutive years from $1.9 trillion in 2015 to $1.3 trillion in 2018, the lowest since the financial crisis in 2008. This has posed challenges for all countries in attracting foreign investment.

In 2018, China’s foreign trade reached a record high despite a global atmosphere where foreign investment is shrinking overall, said Chu Shijia, director of the Comprehensive Department at the MOFCOM.

He pointed out China’s foreign trade and investment have maintained steady growth on the basis of last year’s high volume, indicating great resilience in China’s economy.

On the whole, there are grounds for China’s foreign trade and investment to sustain and grow steadily, he added, mentioning this will be the case in the future as well.

Gao Feng, spokesman for the MOFCOM, said the 2018 negative list has been implemented in various areas, especially pilot free trade zones, and received high recognition as it significantly improved the transparency of foreign investment, as well as facilitated and standardized operations. He also noted the market’s innovation vitality and forces to drive economic development were further stimulated by a better business environment.

Published at the same time were two other indicators of China’s opening-up: The Catalogue of Encouraged Foreign Investment Industries (2019 Revision) and the Catalogue of Advantageous Industries for Foreign Investment in Central and West China. They are listed to boost intensive measures to attract foreign investment in fields such as modern farming, advanced manufacturing, high-tech, energy saving and environmental protection, as well as the modern service industry.

Meanwhile, the newly enacted Foreign Investment Law will guarantee a stronger legal base for foreign investment. MOFCOM is coordinating existing laws, regulations and normative documents to go in line with it. Provisions that are inconsistent with the Foreign Investment Law will be abolished or revised, so as to ensure successful implementation of the law on Jan 1.