Negative List for Market Access to Be Further Shortened

Negative List

China will continue to shorten the negative list for market access this year, as part of the country’s ongoing efforts to optimize its business environment and introduce greater opening-up, according to analysts.
The government’s intensified efforts to revise the nationwide negative list have shown the country’s firm determination to expand market access and build an efficient, fair and unified domestic market, they said, which will also help inject new impetus into the economy and foster high-quality development for the long run.
What is the latest reduction in restrictive/prohibitive measures affecting foreign investment?
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.

Further opening of the manufacturing sector
The new negative lists further liberalize restrictions on foreign ownership in the field of automobile manufacturing. The restrictions that were loosened are the cap on the share ratio of foreign investment in passenger car manufacturing and the regulation dictating that one foreign investor cannot establish more than two joint ventures to manufacture the same types of vehicle in China.The negative lists also level the playing field for foreign and domestic investors operating in the field of radio and television equipment manufacturing, lifting the restrictions on foreign investment in satellite television broadcasting ground receiving facilities and the production of key components.

In addition, there will be no restrictions on foreign investment in the manufacturing sectors in Pilot Free Trade Zones.

Further relaxing of service sectors in the FTZs
Restrictions on foreign investment in the field of market research have now been lifted. However, radio and television rating surveys must still be controlled by the Chinese party.Foreign investors will now also be allowed to invest in the field of social surveys, but the Chinese shareholding ratio can be no less than 67%, and the legal representative must be a Chinese national.

More detailed explanatory notes
The negative lists were released alongside explanatory notes, which, among other things, clarify restrictions on Chinese companies that are operating in fields that are restricted from receiving foreign capital.The notes explain that Chinese companies engaged in one of the fields prohibited from receiving foreign investment must undergo a review and approval process by the government before they can list on a stock market overseas.

Foreign investors are also not permitted to participate in the operation and management of these enterprises, and their shareholding ratio must be governed in accordance with the relevant regulations on the management of foreign investment in domestic securities.

China’s securities regulators and relevant authorities will implement precise management of overseas listing and financing of these domestic enterprises.

The notes add that foreign-invested enterprises must comply with the relevant provisions of the Negative Lists for investing in China, in accordance with the Regulations for the Implementation of the Foreign Investment Law.

In order to properly link the Negative Lists and the Negative List for Market Access, the explanatory notes added that “Foreign and domestic investors must uniformly apply the relevant provisions of the Negative List for Market Access”.

A thorough comparison of the 2020 National Negative List and the 2021 
National Negative List can be found below.

FTZ Negative List can be found below.

Looking forward
China’s foreign investment landscape is changing. With rising labor wages and other manufacturing costs, more investors are starting to cast their eyes on China’s huge market base and high-end manufacturing capabilities. The liberalization facilitated by the 2021 new negative lists will accelerate this trend.The new lists also signal a new level of market opening – they will boost foreign investor confidence in China and accelerate structural upgrades to the country’s existing supply chains.

As to the implementation of the two Negative Lists, the NDRC said if the current laws or regulations need to be adjusted, the relevant departments will do so within two years. That is to say, all the new opening measures are expected to be implemented by the end of 2024 at the latest.

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