China has shown further signs of its continued opening up to foreign investment, with the recent announcement of a new programme focusing on the service industry in the capital Beijing.
The State Council issued its Official Reply to the Beijing Municipality Comprehensive Pilot Programme for Expanding Opening Up in the Service Industry at the beginning of May, approving the plan in principle. The programme entails the further opening of Beijing's service industry to foreign investment, which the State Council says will contribute to the exploration of a new, open economic system and is an important part of the general opening up of China. The pilot will last for three years and is a part of China’s broader strategy for developing and integrating the Beijing, Tianjin and Hebei provinces.
Beijing is the first city to start a trial of this kind, which will see beneficial policies implemented for foreign investors and businesses in the service industry. Alongside its Official Reply, the State Council issued an Overall Plan for the programme. Six key service areas will take the lead, each of which will have a number of relaxation policies and benefits in place. These key service areas, and some of the new policies stated in the plan, are as follows:
- Science and technology services
- Foreign engineering design companies will no longer need to provide a portfolio of work outside China to apply for authorisation to work in Beijing.
- It will no longer be mandatory for foreigners investing in aircraft maintenance projects to have a Chinese majority shareholder.
- Internet and information services
- The programme states that it aims to encourage foreign capital to enter into software and information services, integrated circuit design and other emerging industries and to drive forward innovation in cloud computing, Internet of Things, mobile Internet, next generation Internet, and other service models and business models.
- It also states that it aims to attract multinational companies to set up research and development centres, offshore service centres and business headquarters in Beijing, and conduct joint venture cooperation there.
- Culture and education services
- It will be permitted for foreign investors to establish performance brokerage institutions for the cultural entertainment industry.
- Business and tourism services
- Foreign-invested credit investigation companies will be permitted, with priority being given to Hong Kong and Macao service providers.
- Eligible professionals from Hong Kong and Macao who have obtained the qualification of Chinese certified public accountant will be able to serve as partners of accounting firms in partnership.
- The establishment of Sino-foreign equity joint venture travel agencies that are qualified to engage in outbound tourism (except Taiwan region) will be supported.
- Financial services
- Foreign financial institutions will be allowed to set up foreign-funded banks, and private capital and foreign financial institutions will be able to jointly set up Sino-foreign equity joint venture banks.
- Foreign-funded professional health and medical insurance institutions will be permitted (provided no more than 50% of the shareholding comes from foreign investment).
- Health and medical services
- The conditions for setting up Chinese-foreign equity joint venture and cooperative medical institutions will be relaxed.
The pilot programme also includes plans to optimise the supporting systems such as customs clearance, social credit and market supervision.
The service industry accounts for around 48% of China’s overall GDP and in the last few years has overtaken secondary industry such as manufacturing and construction in terms of its contribution to China’s output. It is therefore a key focus in order for China to turn around its recent economic slowdown. This clearly presents potential opportunities for foreign investors in all sectors, particularly Financial Services, Lifesciences and TMC.
Neither the Official Reply nor the Overall Plan constitutes directly applicable laws and regulations, so foreign investors are not yet able to enjoy the planned incentives and relaxed policies. Detailed implementation regulations on changing or overriding the existing laws and regulations will need to follow, for example providing exemptions to the Catalogue of Industries for Guiding Foreign Investment (Revision 2015). Although the State Council has ordered the immediate implementation of the programme as of the date of its reply on 5 May, so far no implementation regulations have been issued. We will publish a further Law-Now once any further details are announced.
Co-contributed by Ciara Simmons.