The revised Catalogue of Priority Industries for Foreign Investment in the Central-Western Region, jointly issued by the Ministry of Commerce (MOFCOM) and National Development and Reform Commission on December 23, 2008, went into effect on January 1, 2009.
The Revised Catalogue replaces its predecessor, issued in 2004, and the Catalogue of Priority Industries for Foreign Investment in Liaoning Province issued in 2006, (collectively, the Previous Catalogues). Compared to the Previous Catalogues, the Revised Catalogue adds 126 new categories and revises 154 of the original categories. The Revised Catalogue does not apply retroactively; rather, the Previous Catalogues continue to apply to foreign investment projects that were approved in accordance with the Previous Catalogues. Ongoing foreign investment projects that fall within the scope of the Revised Catalogue can enjoy the favorable policies that it espouses.
The Revised Catalogue is organized by province, covering 21 out of the 31 provincial-level administrative regions in mainland China. The changes in the Revised Catalogue integrate certain PRC macro-economic policies, which aim to support the industries hit the hardest by the financial crisis. For example, the Revised Catalogue incorporates the automobile accessory manufacturing industry and cement production industry.
The Revised Catalogue also complies with the principle of comparative advantage, which is evident in its emphasis on the most prominent industries in the central-western region, and on industries that utilize special local resources. In addition, the Revised Catalogue prioritizes industries that have a greater impact on the development of the local economy. For example, to sustain the postearthquake recovery and reconstruction efforts in Sichuan Province, new dry process cement production lines capable of producing over 4,000 tons per day, the engineering machinery industry (controlled by Chinese party), and the automobile accessory manufacturing industry were added to the Sichuan Province section of the Revised Catalogue.
The Revised Catalogue also reflects the changes that China’s economy has seen in the years since Previous Catalogues were issued. Specifically, the Revised Catalogue excludes industries that exploit rare non-renewable mineral resources, in favor of channeling foreign investment into industries that could help preserve natural resources and develop new environmental industries.
In addition, the Revised Catalogue is consistent with the promises that China made when it acceded to the World Trade Organization (WTO) in 2001, as well as with China’s larger plan to liberalize its economy. When China joined the WTO, it promised that it would allow greater foreign participation in its domestic industries. Now that the transition period is almost over, China has to fulfill its promises. Compared with the Previous Catalogues, the Revised Catalogue adds more industries to the top priority list, and reduces the limitations on foreign investment in certain key industries in the central-western region. For example, the Revised Catalogue permits foreign investment in the value-added telecommunications services industry in the central-western region, which reflects China’s promise to liberalize its telecommunications industry that it made upon entering the WTO.
According to the Provisions on Guiding the Direction of Foreign Investments, foreign investment projects falling within the Revised Catalogue may also enjoy the relevant policies toward encouraged industries in the Catalogue of Industries for Guiding Foreign Investment. Additionally, in accordance with the Notice on Matters Concerning the Preferential Tax Policies for the Grand Development of Western Regions jointly issued by the Ministry of Finance, State Administration of Taxation and the General Administration of Customs, the preferential tax policies that aim to promote development of the western regions, such as the preferential tax treatment on the import of foreign equipment and technology, will also apply to the foreign investment projects in the Revised Catalogue.