China Lowers Foreign Capital Threshold, Reduced Negative List to Take Effect in a Month (Comprehensive)

[Image source=AP Yonhap News]

[Asia Economy Beijing=Special Correspondent Park Sun-mi] China will apply the '2020 Edition Foreign Capital Investment Negative List,' which lowers the threshold for foreign investment restrictions from the existing 40 items to 33, starting from the 23rd of next month.

According to the website of the National Development and Reform Commission (NDRC), which oversees China's economic planning, the NDRC, together with the Ministry of Commerce, announced the '2020 Edition Foreign Capital Investment Negative List' on the 23rd and received approval from the Central Committee of the Communist Party of China and the State Council. The effective date is from the 23rd of next month.

The NDRC stated, "This year, COVID-19 has dealt a significant blow to cross-border investment worldwide, affecting the global economy," and added, "The 2020 Edition Foreign Capital Investment Negative List is an important measure to implement broader and deeper comprehensive opening-up, and reducing the list is meaningful."

The nationwide negative list has been reduced from 40 to 33 items. Additionally, the negative list for Free Trade Pilot Zones has been reduced from 37 to 30 items. This means that the sectors in which foreign companies can enter have been further expanded.

The NDRC announced that, to promote the opening of the service sector, restrictions on foreign capital shareholding in financial sectors such as securities, funds, futures, and insurance companies have been removed. Furthermore, in the infrastructure sector, the regulation requiring that the construction and operation of water supply and sewage systems in cities with populations over 500,000 must be conducted by Chinese nationals has also been abolished.

In the manufacturing sector, the foreign shareholding limit for automobile companies has been lifted. The ban on foreign companies entering the nuclear fuel processing industry has also been removed. In agriculture, the shareholding limit for foreign capital in joint ventures related to new wheat variety breeding and seed production has been relaxed to allow up to 66% ownership.

The Free Trade Pilot Zones will continue to reduce their negative lists to serve as a precursor for opening the entire Chinese market. The 2020 edition allows foreign capital to enter the traditional Chinese medicine industry and permits foreign capital to independently establish and operate vocational education institutions.

The NDRC stated that it plans to ensure that the reduced negative lists by region and department are effectively implemented, and separately, that foreign companies receive equal treatment with Chinese companies.

However, some evaluations suggest that much of the content announced today has already been individually disclosed recently, so there may not be many new points attracting market attention. It is also analyzed that this should be interpreted as China’s effort to demonstrate its commitment to fulfilling the Phase One trade agreement through proactive market opening amid escalating US-China tensions.

This content was produced with the assistance of AI translation services.