China releases nation-wide negative list for investment
January 8, 2019 Category China News Round-up, Weekly
China released a new negative list for market entrance, containing 151 items that companies are banned from accessing or need to acquire a license beforehand, marking the first time China introduced the negative list on a nationwide level. In the new list released by the National Development and Reform Commission (NDRC), the government slightly loosened its grip on certain resource-related industries such as coal and nonferrous metals as a way to boost the domestic economy as well as to deal with external pressure. The list consists of 151 items and 581 specific rules, down by 177 and 288, respectively, compared with the previous draft version.
Foreign investors must also abide by the Foreign Investment Negative List, which took effect in July, in addition to the newly updated Market Access Negative List. By way of comparison, the new Market Access Negative List is a 63-page document, whereas the Foreign Investment Negative List is just five pages long, and includes prohibitions on foreign investment in sensitive areas such as nuclear power and inland fisheries.
China has piloted the negative list scheme in about 15 cities and provinces since 2016, after the government released a document on forming a nationwide negative list in October 2015. Compared with the 2016 version, the new list is simplified, cutting 177 items in its main body but detailing the restrictive areas in an attached file. The new list is made up of two categories: industries which companies are not allowed to enter and industries where firms must obtain a license to invest in.
Li Jianwei, Research Fellow at the Law Research Center under the Shanghai Academy of Social Sciences, said that the new list is a “significant push” for the establishment of a fair, open, transparent market-orientated economy as it provides equal market access and competition for all market entities. Cong Yi, Professor at the Tianjin University of Finance and Economics, said that the Chinese government won’t stop reducing the negative list in its efforts to open up the market. He stressed that the negative list mechanism shows a transfer from a system of “approval” – where investors must apply for government approval for any investment they want to do in China – to a system of partial freedom as now they are free to invest in areas not on the list, the Global Times reports.
“The promulgation of the negative list nationwide means that China has set up a unified, fair and rule-based system for market access,” said Xu Shanchang, Director of the NDRC’s Economic System Reform Department. “From now on, other government agencies and local governments are barred from making rules about market entry.”
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