China Foreign Investment Access Negative List – 2019 June Edition

|  China Foreign Investment Access Negative List – 2019 June Edition

China Foreign Investment Access Negative List – 2019 June Edition

By Tanny Chow

22 July 2019

On 30 June 2019, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOC) announced the Special Management Measures for Foreign Investment Access. This is referred to as the Negative List – 2019 June edition.

Two negative lists were revised covering pilot free trade zones (FTZ) and non-free trade zone (rest of the country) respectively. The negative lists govern the sectors that foreign enterprises are prohibited to enter, or with restrictions. The June edition depicts China’s determination to open up its market further to foreign investors.

The negative list will be implemented on 30 July 2019. Below are the changes:

Pilot free trade zones – restricted sectors drop from 45 to 37

Non free trade zones – restricted sectors drop from 48 to 40.

Any business or industry not stated on the negative lists are open to investment by foreign enterprises. The latter are not required to go through the long authorization process.

The following table outlines the businesses and industries prohibited / restricted in the non-free trade zones for foreign investment covering thirteen sectors.

No. Special Management Measures
(1) Agriculture, forestry, animal husbandry, fishery
1 Breeding of new species and seed production of wheat and corn must be controlled by Chinese shareholders
2 Prohibit investment in research and development, planting, breeding and production of rare and unique precious materials (including excellent gene in farming, animal husbandry and aquaculture industries)
3 Prohibit investment in breeding of crops, animal husbandry, aquaculture trans-genetic seeds (and its production)
4 Prohibit investment in fishing of aquatic products within China territorial zone or inland water zone
(2) Mining
5 Prohibit investment in mining, exploration and mineral processing of rare earth, radioactive minerals and tungsten
(3) Manufacturing
6 Printing of publication must be controlled by Chinese shareholders
7 Prohibit investment in smelting and processing of radioactive minerals, and production of nuclear fuel 
8 Prohibit investment in applying production technology (steaming, frying, broiling, calcination) of Chinese oral medicine, and production of Chinese medicine with secret recipe

Except for VIP vehicles and new energy vehicles, Chinese shareholding on vehicle manufacturing must not be less than 50%. The same foreign enterprise can establish up to two joint ventures manufacturing the same vehicle product lines. (In 2020, restriction will be eliminated on foreign / Chinese shareholding % on commercial-use vehicle manufacturing. Commencing 2022, the restriction on foreign shareholding and on the number of joint venture permitted will be removed on passenger-use vehicle manufacturing)

10 Production of on-the-ground reception facilities and essential supplies for satellite television
(4) Power, heat, gas and water production and supply
11 Construction and operation of nuclear station must be controlled by Chinese shareholders
12 In cities where population exceeds 500,000, the construction and operation of water supply and drainage networks must be controlled by Chinese shareholders
(5) Wholesaling and reselling
13 Prohibit investment in wholesaling and reselling of tobacco, cigarette and other tobacco products
(6) Transportation, storage and postal services
14 Domestic water transportation companies must be controlled by Chinese shareholders
15 Public aviation transportation companies must be controlled by Chinese shareholders. The total shareholding of each foreign enterprise and its related companies must not be greater than 25%. The legal representative must be a Chinese national
16 Legal representative of general airline companies must be a Chinese national. Form of investment is restricted to joint venture in the agricultural, forestry and fishery industries. General airline companies in other industries  must be controlled by Chinese shareholders
17 Construction and operation of civil airport must be controlled by Chinese shareholders relatively
18 Prohibit investment in air traffic control
19 Prohibit investment in postal service and domestic courier delivery
(7) Information transmission, software and information technology
20 Telecommunication : restricted to those telecommunication services agreed during China's entry to WTO. Foreign shareholding on value-added services must not exceed 50% (except for e-commerce, domestic multi-party communication, storage and forward, and call center businesses). Fundamental telecommunication business must be controlled by Chinese shareholders
21 Prohibit investment in services engaging in internet news information, internet publishing, internet visual and audio programs, internet culture operation (except music), internet public information broadcasting (except those services committed during China's entry to WTO)
(8) Finance
22 Foreign shareholding of securities companies must not exceed 51%. Foreign shareholding of securities investment and fund management companies must not exceed 51% (Commencing 2021, restriction on foreign shareholding will be removed)
23 Foreign shareholding of future trading companies must not exceed 51% (In 2021, restriction on foreign shareholding will be eliminated)
24 Foreign shareholding of life insurance companies must not exceed 51% (Commencing 2021, restriction on foreign shareholding will be removed)
(9) Leasing and commercial services
25 Prohibit investment in China legal affairs (except providing information on the impact of China legal environment). Foreign national must not be a partner of a legal firm
26 The form of marketing research is restricted to joint venture or cooperation in which survey on television broadcasting must be controlled by Chinese shareholders
27 Prohibit investment in social survey
(10) Scientific research and technology services
28 Prohibit investment in technological development and application in relation to human stem cell, gene diagnosis and treatment
29 Prohibit investment in humanities and social science research institution
30 Prohibit investment in geodesy, oceanic surveying and mapping, aerial surveying and mapping photography, ground motion measuring, administrative regional boundary surveying and mapping, topographic map, world political district map, national political district map, provincial (and below) political district map, nationwide educational map, regional educational map, real 3D map and navigational electronic map editing, regional geological mapping, investigation in mineral geology, geophysics, geochemistry, hydrogeology, environmental geology, geological disaster and remote sensing geology
(11) Education
31 Form of investment in pre-school, general high school and advanced education institution is restricted to China / foreign cooperation with the Chinese side taking a leading role (principal or chief executive officer must be a Chinese national. The ratio of Chinese members on the council, board of directors or joint commission council must not be less than 1/2)
32 Prohibit investment in compulsory education institution and religious education institution
(12) Hygiene and social work
33 Form of investment in medical institution is restricted to joint venture or cooperation
(13) Culture, sport and entertainment
34 Prohibit investment in news institution (included but not limited to news agency)
35 Prohibit investment in editing,  publishing and production of text books, newspaper, periodic, audio commodities and electronic publications
36 Prohibit investment in broadcasting station, television broadcasting station, television broadcasting channel, television broadcasting transmission network (launch station, relay station, television broadcasting satellite, satellite uplink station, satellite transfer station, microwave station, monitoring station, cable television broadcasting transmission network). Prohibit to engage in installation services for television broadcasting of on-demand video business and for on-the-ground reception facilities for satellite television broadcasting
37 Prohibit investment in companies engaging in production and operation of television program broadcasting (including companies engaging in business introduction services)
38 Prohibit investment in film production companies, publishers, cinemas and companies introducing films
39 Prohibit investment in companies engaging in cultural relic auction, shops selling cultural relic, and national cultural relic museum
40 Prohibit investment in art and cultural performing groups

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