China Issues Plan to Further Attract Foreign Investment

On 17 January 2017, State Council of China released the Circular of Several Measures for the Expansion of Opening-up and the Active Use of Foreign Investments ("Circular"), which outlines China’s further opening-up policies that aim to attract overseas investments, enhance domestic business environment and reduce business transaction costs.

The Circular consists of 20 policies and are divided into three categories as follows:

I. Further expansion of the opening-up policy

From the Circular, the Catalogue of Industries for Guiding Foreign Investment (2015 version) and laws regarding the administration of foreign invested enterprises (FIEs), will be further revised and, limits imposed on foreign investments will be further relaxed. For example, in the service industry, accounting, telecommunication, banking, securities, fund management, education, internet and transportation services will be more open to foreign investors.  In the manufacturing industry, current restrictions on FIEs’ production of track transportation equipment, motorcycles and fuel ethanol will be completely eliminated. Finally, restrictions on FIEs’ exploration and exploitation on unconventional oil and gas resources, such as oil shale, in the mining industry, will also be lifted to a certain extent.

In addition, foreign investors will be encouraged to engage in infrastructure construction in China through concession arrangements and make more investment in high-end, intelligent and green manufacturing.  The establishment of R&D centres will also be encouraged.

II. Promotion of fair competition between domestic enterprises and FIEs

The Circular lays emphasis on: ensuring the consistency of the implementation and application of the law among different regions and departments; treating the products produced by FIEs and domestic enterprises equally; promoting FIE participation in government procurement bidding; supporting broadening investment and financing channels for FIEs; building a unified capital registration system for domestic companies and FIEs, amongst other measures.

III. Increasing efforts to attract foreign investments

The Circular also calls for further reform in the administration of foreign investment, facilitating the relocation of industries to the Midwest and Northeast of China, enhancing FIEs’ ability to use overseas financing, supporting foreign investors especially those invest in encouraged industries in obtaining land-using rights, amongst other measures.  In addition, the Circular restates that local governments shall protect the legitimate interests of FIEs and their investors, and may adopt preferential policies within their authorities to attract more foreign investments.

According to the arrangement of the Circular, different departments of the government will work together and change relevant regulations in order to meet the requirements of above policies.  The specific agencies required to take action are specified for each item.

We are awaiting the promulgation or amendment of the relevant regulations and will provide further updates in due course.