On Nov. 4, 2014, the National Development and Reform Commission (the NDRC) released for public comments the proposed draft of revised Foreign Investment Industrial Guidance Catalogue (the Draft). The public comment period ended Dec. 3, 2014.
In 1995, China published the first Foreign Investment Industry Guidance Catalogue (the Catalogue) to provide guidelines on market access and industrial policies for foreign investments. Since 1995, the Catalogue has been revised five times to conform with China’s commitments under its Protocol of Accession to the World Trade Organization (WTO) and to reflect China’s continued economic and social development. The currently effective Catalogue was promulgated by the NDRC and the Ministry of Commerce in 2011 (the 2011 Catalogue).
According to the Catalogue, specific industries are categorized as “encouraged,” “restricted,” or “prohibited” for foreign investment. Any industry not listed in the Catalogue, in the absence of other PRC regulations and rules to the contrary, is considered to be “permitted” for foreign investments. Foreign investors may invest in the industrial areas under the “encouraged”, “permitted” and “restricted” categories; however, as a general rule, foreign-invested projects under the “restricted” category may be subject to a higher level of scrutiny and stricter administrative formalities and restrictions. Foreign investors are banned from investing in “prohibited” industries.
Changes Proposed by the Draft
Compared to the 2011 Catalogue, the Draft involves changes to a variety of industries including, among others, farming, forestry, animal husbandry, fishery, mining, manufacturing, power, heat, gas and water production, and supply industries. The Draft reduces the items under the “restricted” category from 79 to 35. The requirement in the 2011 Catalogue regarding structuring the foreign investment as joint ventures with Chinese partners (i.e., Sino-foreign equity joint venture and Sino-foreign cooperative joint venture; collectively, the Sino-Foreign Joint Ventures) is also eliminated for certain industries. On the other hand, the Draft also imposes stricter control over several industries such as manufacturing of automobiles and motorcycles.
The below table sets forth certain significant changes introduced by the Draft:
Click here to view table.
- Draft Revision of the Foreign Investment Industrial Guidance Catalogue
- Issuing authority: National Development and Reform Commission, the Ministry of Commerce and other authorities
- Date of issuance: Nov. 4, 2014/Public Comment Deadline: Dec. 3, 2014