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China Releases New Catalogue on Foreign Investment in Industry

With State Council approval, the National Development and Reform Commission and the Ministry of Commerce have jointly released the latest Catalogue for the Guidance of Foreign Investment in Industry recently. The new catalogue, which takes effect on 1 December this year, will replace the 2004 version.

In the new catalogue, revisions have been made mainly in the following five areas:

  1. Expansion of the scope of liberalisation and promotion of industrial structure upgrade. In the manufacturing sector, foreign firms will be further encouraged to invest in the high-tech, equipment manufacturing and new materials production industries. In the services sector, China will, in fulfilling its WTO commitments, actively and appropriately expand the scope of liberalisation by adding "service outsourcing", "modern logistics" and other items to the encouraged category and reducing items under the restricted and prohibited categories. Meanwhile, foreign investment in traditional manufacturing industries in which domestic enterprises have already mastered the necessary technologies and have strong production capacity will no longer be encouraged. It has also been clarified that the items under the restricted category in the Catalogue for the Guidance of Industrial Restructuring will also apply to foreign investment.

  2. Resources conservation and environmental protection. In order to encourage foreign investment in the development of the recycle economy, clean production, renewable energy, ecological environment protection and comprehensive utilisation of resources, relevant items have been added to the encouraged category in the catalogue. Foreign investment is no longer encouraged in projects involving important mineral resources that are rare in China or non-renewable. Also, the exploration of certain important non-renewable mineral resources is now off-limits to foreign investment, while foreign investment in high energy consumption, high resources consumption and high pollution projects will be restricted or prohibited.

  3. Adjustment in export-oriented policy. In view of China's growing trade surpluses and fast expanding foreign reserves, foreign trade policy that puts lop-sided emphasis on exports will no longer be implemented.

  4. Promotion of coordinated regional development. In line with the strategies of developing the western region, boosting the rise of central China and rejuvenating old industrial bases in the northeastern provinces, the provision "apply only to the central and western regions" has now been removed from items under the encouraged category in the catalogue.

  5. Protection of national economic security. Prudence will be exercised in the liberalisation of certain strategic and sensitive industries with an important bearing on the nation's economic security. Appropriate adjustments will be made to the relevant items to strike a balance between domestic development and opening to the outside world.