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Chinese free-trade zones further ease access for foreign investors

The Chinese State Council has updated foreign investment negative list applicable to all 11 free-trade zones (FTZs). These special zones offer foreign companies tax concessions and simplified administrative procedures and are particularly attractive for high-end consumer goods, electronics, telecommunications and medical companies who want to expand their business to China.

The gross value of foreign trade to and from these FTZs is growing steadily. In the pilot Shanghai FTZ the proportion of foreign companies nowadays is over 27% and in 2016 the zone reported 73% increase in the number of company registrations.

However, certain sectors are still restricted for foreign investments by the so-called negative list. The new negative list will replace the 2015 edition, marking a reduction of 27 items and 10 industries, and will come into effect on 10 July 2017. It will lift restrictions for foreign investments in a number of sectors, such as manufacturing, finance, rail transport, mining, scientific research, education, etc. Among particular industries are aeronautical and automotive manufacture, shipbuilding, road and water transport, manufacture of communication equipment, such as civilian satellites, internet access service, etc. There still may be some restrictions, but removal from the list means that foreign investors will have to follow the same procedures as domestic ones.

A bit more than 20 industries are still in the negative list, among them pharmaceuticals, certain types of transport, insurance, accounting and audit and some other services. Foreign investors may still engage in some of these businesses through a joint venture with a Chinese party, while other sensitive industries, such as national security, are still prohibited.

The first testing pilot zone was created in Shanghai in 2013 and was replicated later in other provinces, including Guangdong. The zones often serve as an experimental laboratory for the Chinese authorities and it’s expected that a similar negative list will be carried over to whole China one or two years later.

 

 

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