• The Opinions of the State Council on Implementing the Negative List System for Market Access

• Annex: The Work Plan for Carrying Out the Pilot Reform of the Negative List System for Market Access

A State Council document on Oct 19 mapped out plans to draft and implement a series of “negative lists” for market access, as part of the government’s efforts to establish an open, competitive and well-regulated modern market.

According to the document, the State Council will draft lists of industries, fields and businesses from which investments are barred or limited. Governments at all levels will be in charge of enforcement, using related measures. In other words, market participants can have equal access to industries, fields and businesses that are not on the lists.

In terms of the degree of enforcement, the lists can fall into two categories of prohibited entry and limited entry, both applying to initial and expanded investments, mergers, and other market entry behaviors by any voluntary market participant.

For the prohibited entry list, market players will not be approved to get access to such industries by the administrative authority, whereas, for limited entry, market players will have to apply for access, which will then be assessed by the authority, and then meet the requirements laid out by the government.

In particular, market participants should be banned from or limited to entering industries, fields and businesses that relate to national security, the layout of national productive forces, the development of strategic resources and significant public interests. The restriction can take the forms of limited shareholding ratios, scopes of operation, business models and spatial layouts.

In terms of the subject of application, the lists include those for general market access and for foreign investment. The former will regulate both domestic and overseas investors, while the latter will apply to foreigners that engage in investment and business operation in China.

Along with the implementation of the negative list, market players will be able to participate in market competition in an open and fair manner, and are expected to demonstrate more initiative and vitality. Meanwhile, the government can draw a clear boundary of its power, which will contribute to the reform of the administrative approval system to improve efficiency.

The lists will be mainly drafted and released by the State Council, which will also assess and approve local governments’ possible applications for adjustments. They will be put into trial in chosen areas starting on Dec 1 this year to the end of 2017, and will be officially spread all over the country starting in 2018.