China issued a new “negative list” that sets out which of its industries are closed to foreign investors. It was first drawn up in 1995 and has previously been revised seven times. The new list cuts the restricted sectors from 63 to 48, especially in the service industry, infrastructure, railway passenger transportation, international shipping, grain purchases and wholesale. It will become effective on July 28. Two days after releasing the negative list applicable nationwide, the authorities issued a second shorter list for foreign trade zones (FTZs) with only 45 restricted sectors. This list will become effective on July 30. The first FTZ was established in 2013 in Shanghai. There are now 11 FTZs in China.

In FTZs, the foreign investment cap for wheat, new corn variety breeding and seed production will be relaxed from less than 49% up to 66% ownership by foreigners. Restrictions on joint ventures or foreign cooperation in exploration and exploitation of petroleum and natural gas will be removed. The ratio of foreign-invested shares in art performance organizations will also be lifted.

“The new negative list certainly is shorter and opens more sectors, especially the financial sector,” said Mei Xinyu, Researcher at the Chinese Academy of International Trade and Economic Cooperation. China has revised the catalog for the Guidance of Foreign Investment Industries twice over the past five years, reducing restrictive measures on foreign investment by 65%. The government will ease market access by removing the equity cap on foreign investment in sectors such as shipbuilding and aircraft and
automobile manufacturing.

The Chinese government also announced that foreign securities, futures and insurance companies will be allowed to have a majority stake in their Chinese joint ventures this year, and by 2021 there will be no foreign shareholding limit for such businesses, creating more opportunities for foreign players in the sector in China. The list scrapped shareholder ratio requirements for banks and lowered ratio requirements for securities, insurance and futures companies. The list also eliminated restrictions on the shareholder ratio for new-energy vehicles, and provided a road map for the further opening-up of the auto industry. Foreign investors will gain access to the mining of grapheme, a semi-metal widely used in the auto industry.

Meanwhile, China and the EU affirmed progress in negotiations on an investment agreement at the Seventh China-EU High-level Economic and Trade Dialogue held in Beijing. Further discussions will be held at the 20th China-EU Summit in July, Chinese Vice Premier Liu He said. The two sides also exchanged views on China joining the Government Procurement Agreement under the WTO to mutually open government procurement markets.

On the United States’ foreign investment strategy, China’s Ministry of Commerce (MOFCOM) said it would continue to oppose the use of national security to limit foreign investments. Spokesman Gao Feng said China does not agree with the U.S. changing foreign investment conditions and using national security to limit them. Zhu Feng, Dean of the Institute of International Relations of Nanjing University, said adopting national security as a pretext to restrict foreign investment will challenge the world order in a way hitherto unseen.