China Business Insights: Draft amendment to the ‘Catalogue for the Guidance of Foreign Investment Industries’

The China Business Group prepared this alert based on information provided by the Grant Thornton International Ltd member firm in the People’s Republic of China, Grant Thornton China.

Once again, the People’s Republic of China (PRC) is amending the “Catalogue for the Guidance of Foreign Investment Industries.”  On Nov. 11, 2014, the National Development and Reform Commission (NDRC) released a “Notice of Draft Amendment to Catalogue for the Guidance of Foreign Investment Industries” (draft amendment) for public opinion. Any suggestions or opinions can be provided via the website of the NDRC by Dec. 3, 2014. The draft amendment further revises the 2011 version of the catalogue. It is consistent with the spirit of the Third Plenary Session of the 18th Communist Party of China Central Committee, which, among other considerations, aims to deepen market access reform, increase the transparency of the Chinese investment environment and strengthen the methodology of foreign investment management.

The following are salient points in the draft amendment:
  • It significantly reduces the restrictions on foreign investors. It aims to encourage foreign investors to go into the sectors of modern agriculture, high technology, advanced manufacturing, energy conservation and environmental protection, new energy and modern service, etc.
  • Foreign investors are now allowed to invest in sectors including vinyl, oil refining, paper, coal chemical equipment, automotive electronics, lifting machinery, power transmission equipment, famous brands of  liquor, regional rail, subways, international maritime transport, electronics business, finance companies, insurance brokerage companies, stores, land development, and import and export inspection, etc.
  • It allows foreign investors to own more equity interest while reducing Chinese investors’ controlling interest in certain sectors.

In conclusion, the draft amendment is a positive development for foreign investors. It further opens market sectors to foreign investors doing business in the PRC. Foreign investors are advised to stay tuned to developments as rules about the sectors in which they are interested may be relaxed, or investment allowed, in the near future.

Please contact any of the following professionals for details:

Sandy Chu
Principal & National Leader — China Business Group
Grant Thornton LLP
757 Third Ave. New York, N.Y. 10017
T +1 212 542 9970

Wilfred Chiu
Head of Tax Services — Beijing
Grant Thornton China
10th Floor, Scitech Place, 22 Jianguomen Wai Ave.
Chaoyang District
Beijing 100004, China
T + 86 10 8566 5828

Rose Zhou
Head of Tax Services — Shanghai
Grant Thornton China
45/F Raffles City, 268 Xizang Zhong Road
Shanghai 200001, China
T + 86 21 2322 0298

Tracy Ying
Tax Director — Shenzhen
Grant Thornton China
Mid-area 14th Floor, Great China International
Exchange Square, Jintian South Road, Futian District
Shenzhen 518048, China
T +86 755 3299 5844

Enoch Chan
Tax Partner — Guangzhou
Grant Thornton China
Litong Squre 10th Floor, Zhujiang East Road
Zhujiang New City, Tianhe district
Guangzhou 510623, China
T +86 20 3896 3388

This information is potentially subject to translation errors or omissions. It does not represent any type of tax advice whatsoever.

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