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China Foreign Investment Access Negative List 2022

On December 27, 2021, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) jointly issued the updated versions of two “negative lists”, both of which will take effect on January 1, 2022. This is a move to further open China’s markets to foreign investors and promote high-quality development.
The two negative lists refer to the Special Administrative Measures (Negative List) for Foreign Investment Access and the Special Administrative Measures (Negative List) for Foreign Investment Access in Pilot Free Trade Zones (“2021 FTZ Negative list”)
Two China negative lists of fields restricted to foreign investment have been further shortened in a new update and will replace their respective 2020 versions. The 2021 Edition reduce the number of sectors in which foreign investors are restricted or prohibited from participation, further opening access to key areas of the economy.

Significant Changes

One significant change of the new lists is the deepening of the opening-up of the domestic manufacturing industry, after which the negative list governing free trade zones’ manufacturing sector will be brought down to naught.
Under the list, restrictions on foreign ownership in passenger car manufacturing and restrictions on the establishment of two joint ventures in China for the production of the same type of whole vehicle products will be lifted. In terms of radio and television equipment manufacturing, restrictions on foreign investment in the production of ground reception facilities and key components for satellite television and radio broadcasting will be erased, with management for foreign investment being the same as domestic enterprises.
The opening-up of the auto sector is in tandem with a plan the NDRC laid out in 2018, under which China would remove foreign ownership caps for companies making fully electric and plug-in hybrid vehicles in 2018, for makers of commercial vehicles in 2020, and the wider passenger car market by 2022.

Registered company location.

For five years in a row, the two new negative lists have continued to reduce the number of measures limiting access to foreign investment.

The 2021 National Negative List has removed two restricted items from its 2020 counterpart, cutting it 33 to 31, while the new 2021 FTZ Negative List removed three items, cutting it down to 27 from 30.

Significant change

One significant change of the new lists is the deepening of the opening-up of the domestic manufacturing industry, after which the negative list governing free trade zones’ manufacturing sector will be brought down to naught. 

Under the list, restrictions on foreign ownership in passenger car manufacturing and restrictions on the establishment of two joint ventures in China for the production of the same type of whole vehicle products will be lifted. In terms of radio and television equipment manufacturing, restrictions on foreign investment in the production of ground reception facilities and key components for satellite television and radio broadcasting will be erased, with management for foreign investment being the same as domestic enterprises.

The opening-up of the auto sector is in tandem with a plan the NDRC laid out in 2018, under which China would remove foreign ownership caps for companies making fully electric and plug-in hybrid vehicles in 2018, for makers of commercial vehicles in 2020, and the wider passenger car market by 2022.

 

Restricted area.

Under the negative list on free trade zones, restrictions on access to the market research field will be lifted except in certain areas that collect views on radios and TVs, and social research for foreign investment will be allowed. But the proportion of shares held by Chinese enterprises should not be less than 67 percent, and the legal representative should be a Chinese national.

The new list also includes specific terms on the overseas listing of Chinese enterprises engaged in businesses prohibited by the negative list, as well as caps on foreign investors’ shareholding in Chinese companies listed in the mainland through various means such as Stock Connect, QFII and RQFII – the first time that such explanations have been detailed amid China’s intensifying efforts to promote the two-way opening-up of capital markets.

According to the new list, some restrictions on foreign investment are still in place, such as a ban on investing in rare-earths, and the wholesale and retail of tobacco products. The shares held by foreign investors in telecom value-added business must not exceed 50 percent, while the construction and operation of nuclear plants must be controlled by Chinese firms.