China: new Catalogue of Industries for Guiding Foreign Investment

Foreign investment Catalogue

A new foreign investment Catalogue has been jointly issued by the Chinese Ministry of Commerce and National Development and Reform Centre.

The Catalogue takes effect from December 1, 2007 and sets out those industries which are open to foreign investment; and foreign companies which are encouraged, restricted or prohibited from entering the Chinese market.

Key changes from the 2004 Catalogue include:

• encouraging foreign investment in the manufacture of hi-tech equipment and new materials
• promoting China as a destination for outsourcing and supply chain management
• no longer encouraging investment in conventional manufacturing industries where Chinese production already has enough capacity and uses advanced technology
• encouraging investment in recycling, clean production, renewable energy, protection of the ecosystem and comprehensive use of resources
• prohibiting exploration for rare and non-renewable mineral resources
• prohibiting investment in projects involving high energy consumption and pollution
• no longer encouraging all export-oriented foreign direct investment (removed from the Catalogue due to China’s growing trade surplus)
• removing from the Catalogue certain industries for which investment was previously only encouraged in central and western China and insertion in a separate catalogue covering also northeast China
• restricting foreign investment in certain industries deemed key to national economic security, such as mining for coal; and allowing only joint venture arrangements to extract coal bed gas
• removing residential construction projects from the list of encouraged industries
• encouraging wider investment in railway transportation to include R&D, design of parts and lines, manufacture of ancillary products and infrastructure maintenance and repair
• allowing investment in national grid construction and management as long as a Chinese party holds the majority equity stake in any project