situation report

Jul 1, 2019 | 21:09 GMT

2 mins read

China: Beijing Loosens Restrictions on Foreign Investment

What Happened: China announced a new "negative list" June 30 loosening restrictions on foreign investment in seven industries, Nikkei reported July 1, and its National Development and Reform Commission released a new version of its Encouraged Industries for Foreign Investment Catalogue, which specifies industries where foreign investment can receive preferential treatment. The former list loosens restrictions in domestic shipping, gas and heating pipelines in cities with more than 500,000 people, construction and movie theater operations. It also paves the way for foreign investment in hydrocarbon exploration and development, and the exploration and mining of minerals such as molybdenum. Some agriculture sectors were also opened up. The list will be effective on July 30, and the restrictions are expected to be fully lifted by the end of 2019. The Encouraged Industry catalog meanwhile offered preferential treatment to foreign investment in 415 industries nationwide and 693 industries in the central, western and northeastern regions. The Encouraged Industry list prioritizes high-end, intelligent and green manufacturing, including 5G, integrated circuit, cloud computing and vehicle component technology.
 
Why It Matters: Beijing is using the moves to establish its commitment to wider market reforms and to soothe foreign investment concerns amid its ongoing trade war with the United States. Market access restrictions are one of China's numerous nontrade barriers to foreign investment. Some reports indicate that Beijing has also sought to at least temporarily alleviate other nontrade barriers, such as government regulations and custom inspections.
 
Background/Context: The original 2018 version of China's negative list maintained restrictions on foreign investment in 48 sectors, including wheat and corn seeds, genetically modified organisms of certain agricultural products, oil, natural gas aside from joint ventures in the sector, and mining. It also restricted industries including pharmaceuticals, printing and nuclear power, and partially restricted some other industries, such as the automotive, financial, retail and telecom sectors.

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