The Chinese government routinely reanalyzes which industries to encourage foreign investment in and makes fiscal policies that encourage individuals and businesses from other countries to help fund specific industries. The 2019 Draft Encouraged Catalogue was the first sneak peak into this list of industries. The current list provides a number of surprising additions.
Update: China New Foreign Investment Law
About the Release of Encouraged Industries in China Catalogue
Beijing first released the catalogue for public comments, which were closed in March 2019. The Ministry of Commerce and the National Development and Reform Commission released the current list together.
Periodically, the Chinese government will create a new iteration of this document to provide insight into the government’s growth priorities, as well as insight into when foreign knowledge and resources are desired. Prudent investors can decide to invest in those areas on the current list to receive significant incentives.
Previous Government Insight on Encouraged and Prohibited Investments
The last version of the guiding document on Chinese foreign investment was the Catalogue of Industries for Guiding Foreign Investment, which was released in 2017. This list included categories that encompassed industries that were encouraged, prohibited and restricted for foreign investment. Then, in the middle of 2018, the so-called “Negative List” was published, dividing the 2017 Catalogue into two separate parts: the list of encouraged industries and the negative list.
Advantages of Investing in Encouraged Industries
The government provides a number of significant incentives to foreign investors who invest money and resources into those industries on the encouraged list. Some of the benefits include:
- Procedures that streamline the approval process
- Discounted prices for investment in land
- Preferential tax treatment
The reformations provide benefits to investors who can enjoy a more favorable commercial environment in a more diverse array of industries. Investors in high-tech, agricultural or environmentally-friendly projects have the most to gain, according to the list of priorities.
Encouraged List of Industries
The current version is the most recent revision to the encouraged list portion of the 2017 Catalogue.
It has opened a number of different sectors to investment from foreigners. It includes 402 sub-industries in order to promote foreign investment in a number of key sectors, including modern service industries, modern agriculture and advanced manufacturing.
Many of the industrial sub-industries are considered high-tech manufacturing and artificial intelligence, along with other technological investments for the purposes of advancing health services, recycling, establishing environmentally-friendly processes or innovative agricultural practices.
Some of the key industries that made the 2019 list include the following:
Agriculture, Forestry, Animal Husbandry, and Fishery
Particular areas of encouraged investment include the construction and management of ecological environment protection projects and aquatic seeding breeding.
The Chinese government is currently focusing on key raw materials for the production of vaccines and cell therapy drugs. It is also encouraging investment in large scale cell culture products.
Recycling used textiles is another encouraged area of investment.
General Equipment Manufacturing
The Chinese government is currently encouraging foreign investment in lenses, sensors, motors and optical lenses. It is also encouraging investment in mobile phones, virtual reality and enhanced displayed products, cars, drones and other fifth generation mobile terminals.
Rubber and Plastic Product Industry
Businesses that develop, produce and apply biodegradable plastics as part of their product may receive foreign investment.
The encouraged areas of foreign investment for this new category are the development of e-commerce systems and application services.
Technical service areas of foreign investment include AI technology, medical robots for medical advancement, green buildings, energy and smart devices.
Water Conservancy, Environment and Public Facilities Management Industry
The Chinese government is encouraging investors to invest funds into the management of river and lake water environments.
Health and Social Work
Medical institutions and aged institutions are now distinguished and are areas of encouraged investment.
Culture, Sports, and Entertainment
The areas of encouraged foreign investment under this category include tourism information services and tourism infrastructure construction.
Regional Organization and Investment
The new format of the current encouraged catalogue is made up of two regional lists. The first region includes:
- Central China
- Western China
- Northeaster regions in China
- The Hainan province
The second region is called the “national list” and consists of all other regions in China. This division is in place to encourage specific regional investments.
Changes to the Negative List
The Chinese government also recently made some major changes to its Negative List. Before July 2018, there were 63 prohibited or restricted measures. After this point, there were 48. The number of restrictive measures in China’s free trade zones were reduced from 95 to 45.
The 2018 Negative list relaxed and removed several restrictions on foreign investment in certain sectors, including infrastructure, agriculture and mining. These changes were made effective immediately. Other changes were scheduled for gradual reform based on a different timetable, including automobile, insurance and finance sectors.
In addition to the national list, the Free Trade Zone Negative List reduced 50 restrictive measures on the list and removed additional restrictions, including the following:
- Stage performance agencies
- Aviation manufacturing
- Prospecting and exploitation of petroleum and natural gas
- Smelting and processing of radioactive mineral resources and the production of nuclear fuel
- Wholesale retail of tobacco and cigarettes
- Foreign education institutions
- Legal services
Expert Assistance with Foreign Investment Matters
Horizons helps investors everyday who are looking to add Chinese businesses to their portfolio. Our seasoned experts can discuss the types of business you are looking to invest with, whether these industries are open to foreign investment and what areas can provide you with the most significant advantages and tax incentives.
We offer full consulting and legal services to help you learn about your options and how to stay in compliance with Chinese regulations. We can also help you set up your own business entity in China through our company incorporation services. Clients throughout the world trust Horizons with these services, as well as a leading PEO in the Chinese market.
Contact us online to learn more about how we can help in China.