Certain restrictions on foreign investment in China removed by new Negative Lists
On 27 December 2021, the National Development and Reform Commission and the Ministry of Commerce of the People’s Republic of China (“PRC”) jointly issued the Special Administrative Measures (Negative List) for Foreign Investment Access (2021 Edition) (“2021 Nationwide FDI Negative List”) and the Special Administrative Measures (Negative List) for Foreign Investment Access in Pilot Free Trade Zones (2021 Edition) (“2021 FTZ FDI Negative List”), which came into effect on 1 January 2022 and replace their respective 2020 versions.
The Negative Lists enumerate the industries where foreign investment is either prohibited or restricted. This is the fifth consecutive year that the PRC has revised its Negative Lists.
Changes to 2021 Nationwide FDI Negative List
The 2021 Nationwide FDI Negative List reduces the number of sectors restricted or prohibited to foreign investors from 33 to 31, removing restrictions relating to the cap on the share ratio of foreign investment in passenger car manufacturing and the requirement that a single foreign investor could not establish more than two joint ventures to manufacture the same type of vehicle in the PRC. Also removed is the restriction on foreign investment in the manufacturing of satellite television broadcast ground receiving facilities and critical components.
Foreign investors are now able to invest in these industries and be subject to the same administration requirements as PRC investors, without any special restrictions.
Changes to 2021 FTZ FDI Negative List
The 2021 FTZ FDI Negative List makes the same changes as the 2021 Nationwide FDI Negative List. In addition, restrictions relating to foreign investment in certain business service sectors of the free trade zones have been relaxed.
Restrictions on foreign investment access have been lifted in the field of market research, with the exception of radio and television ratings surveys which must be controlled by a Chinese party. In relation to social surveys, foreign investors are now allowed to invest in this sector in the form of Chinese-foreign joint ventures; however, the shareholding ratio of the Chinese party shall not be less than 67% and the legal representative of the joint venture must have Chinese nationality.
Restrictions imposed on PRC companies
The explanatory notes of both Negative Lists have been amended to stipulate that overseas listings of domestic enterprises engaged in business in the areas prohibited for foreign investment as set out in the Negative Lists must now be examined and approved by government authorities. Foreign investors must not take part in the operation and management of such companies, and their shareholding ratio must be in keeping with the regulatory requirements applicable to foreign investors investing in securities in the PRC.
