8 May, 2016
China has introduced a trial market-entry negative list for Shanghai, Tianjin, Guangdong and Fujian. Investment projects not included in the trial negative list may be established by registration only; that is, governmental approval will not be required. This is a significant step toward a nationwide negative list, and is consistent with the foreign investment reforms promised by the draft Foreign Investment Law. The trial market-entry negative list will be effective once the State Council approves detailed implementation plans of the four trial regions (see below).
The Ministry of Commerce (MOFCOM) and the National Development and Reform Commission (NDRC) unveiled the trial market-entry negative list on 11 April 2016. The trial negative list was issued in accordance with the State Council’s Opinion on the Implementation of the Negative List Market-Entry System (Opinion) issued on 2 October 2015.
HIGHLIGHTS OF THE TRIAL NEGATIVE LIST
Prohibited and restricted sectors
The trial negative list sets out sectors and business operations that are prohibited or restricted for investment (whether Chinese or foreign) in China. For the prohibited sectors, investment is not permitted. For the restricted sectors, either governmental approval will be required, or the investment may be subject to conditions and requirements in accordance with relevant laws and regulations.
The trial negative list includes 96 prohibited items in 17 sectors and 232 restricted items in 22 sectors. These items were mainly compiled from existing laws, regulations and administrative catalogues. They also include new items that were previously not restricted or prohibited. For example, an approval requirement for collaborations between domestic media and foreign news agencies, and a content censorship requirement for gaming and entertainment equipment, have been newly introduced by the trial negative list.
Implementation
The four trial regions are required to enact their own detailed implementation plans. The local implementation rules will become effective upon approval by the State Council.
According to the Opinion, the negative list will be rolled out nationwide by 2018.
Relationship with the current FTZ negative list
A negative list was first introduced in the Shanghai Free Trade Zone in September 2013, and subsequently rolled out in an additional three free trade zones (FTZs) in Tianjin, Fujian and Guangdong.
The FTZ negative list currently contains 122 items of special management measures for the market entry of foreign investment in the four FTZs. Foreign investors investing in the four FTZs will be subject to the restrictions and prohibitions contained in both the trial negative list and the FTZ negative list.
Looking forward
The trial negative list is a major step toward streamlining governmental regulation on investment and improving market entry. However, the list contains many more items than had been expected.
The NDRC and MOFCOM have indicated that they will seek feedback from the four trial regions in their implementation of the trial negative list and that they will make adjustments as needed. It is hoped that the trial negative list will get shorter over time.
For further information, please contact:
Nanda Lau, Partner, Herbert Smith Freehills
nanda.lau@hsf.com
