On June 16, 2017, the State Council released SCS 51 [2017] State Council on the issuance of special measures to control foreign investment in free trade zones admission test (negative list) (2017 edition) [国务院办公厅关于印发自由贸易试验区 外商投资准入特别管理措施(负面清单)(2017年版)的通知) 国办发〔2017〕51号], which further relaxes foreign investment activities in the free trade areas. The new guidance is effective on July 10, 2017 and repeals the 2015 guidance. The relaxed rules apply only to foreign companies’ operations in the free trade zones. It is unclear how these openings will also be reflected in the final revised Catalogue Guiding Foreign Investment (CGFI), which would apply to foreign company operations nationwide and are expected to be released shortly.

The U.S. China Business Council has summarized the relaxation as follows:

  • Mining- Restrictions were removed on precious metals exploration and mining, lithium mining and mineral processing.

Manufacturing

  • Aviation – The Chinese controlling ownership requirement has been removed for the manufacture of helicopters over three tons; restrictions to JV and cooperative investments have been lifted for the design, manufacture and maintenance of general aviation aircraft below six tons and with nine seats or fewer.
  • Shipping – The Chinese controlling ownership requirement has been removed for low- and medium-speed diesel engine manufacturing; Chinese controlling ownership has been removed for marine engineering equipment manufacturing and repair.
  • Automotive – Certain restrictions related to foreign investment in production of fully electric (i.e. non-hybrid) vehicles appear to have been lifted. Liberalizations relate to how these vehicles must be branded, and the requirements surrounding the intellectual property rights and patents involved.
  • Rail – Manufacturing of railway transportation equipment is no longer limited to joint ventures, and there is no longer a requirement that urban rail transit projects use at least 70 percent domestically made equipment.
  • Telecom – The Chinese controlling ownership requirement was removed for civil satellite design and manufacturing, and civilian satellite payload manufacturing.
  • Rare metal processing – Restriction on processing molybdenum, tin, antimony, and other rare metals were lifted.
  • Transportation – Restrictions on investment in road passenger transport and restrictions limiting investment in foreign freight shipping to joint ventures and cooperative arrangements were removed.
  • Internet – Though other licensing requirements remain in place that will continue to limit the ability of foreign companies to operate in this sector, restrictions on foreign companies investing in “internet service business premises” were removed.

Financial services

  • Banking – Prohibitions on issuance and underwriting of government bonds were lifted. The bond underwriting liberalization was among the initial 100-day outcomes between the United States and China announced in May. Requirements for a minimum operation time tied to foreign banks being allowed to offer certain RMB services were also lifted, but other RMB service-related restrictions remain. Total asset requirements for foreign financial asset management companies were also lifted.
  • Insurance – Restrictions on foreign insurance companies engaging in reinsurance with affiliated enterprises were also lifted.

Professional services

  • Auditing – Requirements that the chief partner of a firm be a Chinese national were removed.
  • Analytics and Investigations – Removed restrictions on foreign investment in institutions that produce statistical analysis of social programs, and conduct domestic surveys.
  • Ratings – Lifted restrictions on foreign ownership of credit ratings agencies. As noted above, this liberalization was included in the draft revised CGFI and in the initial 100-day outcomes of the recent US-China negotiations.
  • Other – Regulations restricting foreign nationals from serving as the legal representative of immigration agencies were repealed.

Education

  • Publishing – Restrictions on importation of cultural products such as art and digital journals and databases no longer apply.