The National Development and Reform Committee ('NDRC'), along with the Ministry of Commerce, announced the latest draft amendment to the 2011 Catalogue for the Guidance of Foreign Investment Industries on 4 November 2014 (the '2014 Draft'). The NDRC called for public comments on the 2014 Draft by 3 December 2014.
The Catalogue sets out the government-imposed classifications ('encouraged', 'restricted', 'prohibited' and 'permitted') on foreign direct investments in various industrial sectors. The 2014 Draft significantly shortens the list of those falling within the 'restricted' category. It also increases the proportional limit on equity ownership held by foreign investors and highlights the liberalisation of the manufacturing and service industries.
However, the 2014 Draft also removes the engagement of human resource services through outsourcing arrangements from the 'encouraged' category, in contrast with the earlier 2011 edition. Following this change, the understanding is that the engagement of human resource services may be categorised as 'permitted'. This seems to suggest a stricter approach to the outsourcing of HR services.
Previously, the government had manifested a more liberal stance in its Supplementary Provisions for the Tentative Provisions for the Administration of Sino-foreign Equity Joint Venture Personnel Agencies (the "Supplementary Provisions") issued in 2008. Under the Supplementary Provisions, the equity ownership proportional limit for Hong Kong and Macao-based investors which set up Sino-foreign equity joint venture personnel agencies in China was lifted, meaning that Macao and Hong Kong investors are allowed to establish such agencies as Wholly Foreign Owned Enterprises. The Beijing government's Opinion on Speeding Up Development of Human Resource Services issued on 29 September 2014 (the 'Opinion') may be viewed as a further step for liberalisation. It provides that, in a specific area in Zhong Guan Cun, a foreign investor may hold up to 70% of the total shares of a Sino-foreign equity joint human resource agency.
Although the amendments set out in the 2014 Draft appear to be regressive, in that they seem to signal a less liberal approach to foreign investors engaged in human resource services than is currently provided for under the Supplementary Provisions and the Opinion, they are currently only in draft form and it is advisable to keep a close eye out for the final version.