China Releases New Negative Lists

On 30 June 2019, two new editions of the so-called “Negative Lists” were issued: the Special Administrative Measures on Foreign Investment Access[1] (“National Negative List”) and the Special Administrative Measures on Foreign Investment Access in Pilot Free Trade Zones[2] (“FTZ Negative List”). These Negative Lists will take effect on 30 July 2019, replacing the corresponding ones of 2018.

These issuances tie in with the newly promulgated Foreign Investment Law of the People’s Republic of China (“FIL”), which as of 1 January 2020 will regulate foreign investment in China according to a principle of “pre-establishment national treatment” plus Negative Lists: in short, a foreign party may invest in China just like a domestic party unless the investment falls within one of the sectors enumerated in the Negative Lists.[3]

The National Negative List contains 40 prohibited or restricted sectors, down from 48, while the FTZ Negative List contains 37, down from 45. The restrictions that have been eliminated or relaxed are as follows:[4]

• In Value-Added Telecommunications Services (“VATS”), the following sub-categories are fully open to foreign investment nationwide: domestic multi-party communications services, store-and-forward services and call center services. Prior to this National Negative List, within the online data processing and transaction processing services sector (a.k.a. “EDI”), the only sub-category open nationwide was e-commerce business.
• In the building and operation of gas and heat pipelines in cities with more than 500,000 people and of movie theaters as well as in performance brokerage institutions and domestic shipping agencies, foreign investors are no longer limited to a minority shareholding.
• In the printing of publications, foreign investors in FTZs are no longer limited to a minority shareholding.
• In the exploration and development of oil and natural gas, foreign parties no longer need to enter into joint ventures or other cooperative relationships.
• In the production of Xuan paper and ink ingot, the exploitation of wildlife resources originating in China and under national protection and the exploration and exploitation of molybdenum, tin, antimony and fluorite, foreign parties may invest freely.
• In the harvesting of aquatic products in the territorial or inland waters of China, foreign parties may invest freely in FTZs.

For the sectors eliminated from these latest editions of the Negative Lists, just as for any other sectors not on them, market access requirements and procedures for foreign investors should be the same as or similar to those for domestic parties. In some sectors, however, foreign parties are still subject to some additional requirements and procedures, e.g., obtaining approvals from the Ministry of Industry and Information Technology for engaging in VATS. For the sectors not eliminated from the latest Negative Lists, foreign investment is still restricted or, e.g., in publishing, news and broadcast television, completely prohibited.

[1] Special Administrative Measures on Foreign Investment Access (Negative List) (2019 Edition) (《外商投资准入特别管理措施(负面清单)(2019年版)》), jointly issued by the National Development and Reform Commission (“NDRC”) and the Ministry of Commerce (“MOFCOM”).

[2] Special Administrative Measures on Foreign Investment Access (Negative List) in Pilot Free Trade Zones (2019 Edition) (《自由贸易试验区外商投资准入特别管理措施(负面清单)(2019年版)》), jointly issued by the NDRC and MOFCOM.

[3] For more information on the FIL, please see DaHui’s Newsletter here.

[4] There are only eliminations, no additions, in the restrictions.