On December 7, 2016, the National Development and Reform Commission (“NDRC”) and the Ministry of Commerce (“MOFCOM”) jointly published the Draft Revised Guideline Catalogue on Industries for Foreign Investment (“the Revised Catalogue”) and opened a period for public comments until January 6, 2017.

Compared to the 2015 edition, the Revised Catalogue reduces the number of restricted items to 62, including industries with shareholding requirements, restricted industries and prohibited industries. Together, these make up the “Industries with Special Requirements to be entered by Foreign Investment,” known as the “Negative List.” This restructuring stems from the Negative List issued by both authorities in October 2016 along with the reform on examination and approval procedures of foreign investment. 

The Revised Catalogue also: 

1. deletes 11 prohibited and restricted items to reflect the equal treatment of domestic and foreign investments in areas such as operating casinos; building and operating large scale theme parks, and building golf courses;

2. removes the following items from the restricted category;

- credit investigation and rating service companies;

- highway passenger transport companies;

- tallying of foreign vessels;

- exploration and mining of precious metals (gold, silver, the platinum group and lithium);

- manufacturing of biological liquid fuel;

- processing of edible oil, rice, flour, crude sugar and corn;

- smelting of certain rare metals; 

3. adds to the encouraged category the remanufacturing of office equipment such as printers, as well as key components for medical imaging equipment and the manufacturing of smart emergency medical rescue equipment, among others;

4. includes encouraged industries with shareholding requirements on the Negative List, which means these industries will continue to benefit from the encouraged policies (e.g., tax incentives), but are also subject to restrictions (e.g., the approval and examination procedure instead of the newly introduced record-filing);

5. deletes requirements on shareholding ratios for the following industries, partially drawing on experience in the four pilot free trade zones: [1] 

- manufacturing of motorcycles (restricted);

- design and manufacturing of civil satellites, and manufacturing of civil satellite payloads (encouraged);

- use of mine gas (encouraged);

6. moves the following items from encouraged or restricted industries to permitted industries and removes the restrictions in parentheses: 

- accounting and auditing (chief partner must be Chinese national);

- manufacturing track transportation equipment (equity or cooperative joint ventures);

- manufacturing and R&D of high-energy power batteries for new energy automobiles (50% maximum foreign shareholder ratio);

- building and operating comprehensive hydro-junctions (controlling shareholders must be Chinese);

- manufacturing and repairing marine engineering equipment (controlling shareholders must be Chinese);

- manufacturing low and medium speed diesel engines and crankshafts for vessels (controlling shareholders must be Chinese);

- developing and manufacturing food for the elderly;

- manufacturing isoprene rubber;

- manufacturing aluminum nitride (AIN) ceramic substrates;

- manufacturing yachts;

- manufacturing vessel communication and navigation equipment; 

- coal-fired power stations;

- manufacturing special processing machines;

- manufacturing large pumped power storage units with rated power of 350 MW or above;

- passenger-dedicated railway lines; and

- building and operating urban parking facilities; 

7. adds a new requirement for public air transportation companies and general airline companies: their legal representative must be a Chinese national;

8. specifies in the notes to the Negative List that industries with shareholding ratio requirements cannot have Sino-foreign partnerships.

Date of issue: December 7, 2016. Deadline for public comments: January 6, 2017