Entry in the Chinese market is regulated by a series of ad hoc regulations, most notably those called ‘negative lists’. These documents stipulate open, restricted or prohibited sectors for foreign investment. There are three main types of negative lists:
- The Special Administrative Measures on Access to Foreign Investment, also called Foreign Investment Negative List, applies nationwide and indicates the industries and sectors in which foreign investment is restricted or prohibited. The latest 2021 edition, featuring 31 items, was published by NDRC and MOFCOM in December 2020, and can be accessed at this link.
- The Free Trade ZoneSpecial Administrative Measures on Access to Foreign Investment, also called FTZ Foreign Investment Negative List. It follows the same logic of its nationwide counterpart, but contains less restricted or prohibited sectors and it only applies to the 22 Free Trade Zones established across China. The latest 2021 edition, featuring 27 items, was published by NDRC and MOFCOM in December 2020, and can be accessed at this link. Similar Negative List exists for the Hainan Free Trade Port, containing even less restricted items for foreign investment and trade in services.
- The Market Access Negative List is similar to the previous lists, but it applies to all actors in mainland China regardless of their nature (state-owned, private, non-profit) and country of origin (Chinese entity or foreign-invested). The latest 2022 edition, featuring 27 items, was published by NDRC and MOFCOM in March 2022, and can be accessed at this link.
Foreign investors looking to open companies in China should carefully review all these lists before making any decisions, starting from the Foreign Investment Negative List (either national or FTZ) and ending with the Market Access Negative List. According to the new Foreign Investment Law (entered into force in January 2020), for all sectors not included in any of the above lists, foreign investors are supposed so be treated on equal footing as domestic investors with no need for pre-approval from authorities.
Besides the negative lists, China has also established the Catalogue of Encouraged Industries for Foreign Investment, a ‘positive list’ indicating which sectors are particularly open and welcoming for foreign investment, both nationwide as well as in central and western regions. Foreign investors in these sectors will receive much stronger support from local administrations, in terms of incentives, preferential policies, access to administrative services, etc. The draft of the 2020 edition of the list was published by NDRC and MOFCOM in December 2020, and can be accessed at this link. The Positive List is expected to be updated again during the course of 2022.