Oct 11, 2016


Last month, the State Council announced plans to adjust regulations regarding foreign investment into the Tianjin, Shanghai, Fujian and Guangdong free trade zones (FTZs), which will significantly affect application and entry procedures.

The adjustments are split two ways – some that simplify application procedures and the operation of foreign invested or joint venture enterprises, and others that open once restricted sectors to foreign investment. Either way, it is important for investors looking to enter or already in these FTZs to be aware of these latest regulatory adjustments.

Below, we detail the industries in which previous restrictive related content or regulations have been temporarily suspended, thus allowing the involvement of foreign invested companies:

  • Utilization of gas opbtained by the means of coal mining;
  • Manufacture of R&D of computerised bus technology/electronic assisted controlling systems;
  • Manufacture of energy storage batteries with storage density>=110Wh/kg and life >=2000 uses;
  • R&DS design or manufacture of high-speed railway, railway passenger line of intercity rail passenger servicxe3 facilities or related track and bridge equipment, or the manufacture of electrified railway equipment or passenger railway sewerage equipment;
  • Construction oand operation of integrated water conservancy projects;
  • Processing of woybean iol, rapeseed oil, peanut oil, cottonseed oil, tea seed oil, sunflower oil, palm oil, other edible oil, rice, flour, sugar and corn;
  • Production of biological liquid fuel such as ethanol or biodiesel;
  • Engagement of certain printing companies, subject to the administration of the State Press, Publication, Radio, Film and Television;
  • Air cargo warehousing, ground services, airline food, and parking projects;
  • Restrictions listed on China holdings for foreign investors engaging in general aircraft maintenance, canceling the obligatory requirements of foreign investors in aircraft maintenance contract of international maintenance businesses;
  • Qualified foreign travel agencies allowed to conduct outbound Chinese residents’ travel services (excluding Taiwan);
  • Motorcycle manufacturing;
  • Iron and steel production;
  • Free engagement of direct sales businesses;
  • Construction, operation and development of petrol stations;
  • Establishment of international ship management, international maritime cargo handling, and international maritime container freight station and container yard services or enterprises;
  • Public international shipping agency businesses (the proportion of foreign ownership broadened to 51%);
  • Establishemtn of air transport sales agencies;
  • Accrediting and certification agencies;
  • Entertainment businesses;
  • Salt whilesale business;
  • Establishment of international shipping companies providing international maritime shipping services;
  • Relaxation of the fund and investment ratio restrictions of establishing Sino-foreign joint venture international shipping companies.

Additionally, the government lifted the restrictions on foreign investors wishing to partake in the purchase of grain, wholesale of cotton and grain and operation and construction of large scale agricultural product wholesale market in all the three FTZs. The requirements of Mainland holdings for Sino-Taiwanese joint ventures engaged in crop production (except cotton and oil crops), breeding of new crop varieties (except transgenic) and seed production (except GM products) have also been temporarily suspended in the Fujian FTZ.

For sectors not included in the FTZs’ Negative List for Foreign Investment – which determines which industries foreign companies can invest in – the following conditions will be temporarily suspended and replaced with a filing administration system in all FTZs:

  • Approval of foreign investment projects
  • Approval of establishment of foreign invested enterprises (FIEs), Sino-foreign joint ventures or Taiwanese invested enterprises;
  • Merging or separation of FIEs, or any other such reasons which cause significant change to capital approval;
  • Changes to the amount of registered capital requirements for FIEs or Sino-foreign joint venture;
  • Foreign mortgage or transfer approval of property owned by FIEs;
  • Approval of contribution by foreign or Sino-foreign investors.
  • Approval of the operation period of FIEs.
  • Approval of Sino-foreign joint venture equity transfer.
  • Approval of Sino-Foreign joint funded/joint venture disbandment.
  • Approval of major changes to the contract, agreement or rules of a Sino-foreign joint venture.
  • Reduction of registered capital of a Sino-foreign joint venture.
  • Approval of the transfer of rights as stipulated in the contract of a Sino-foreign joint venture.
  • Approval of Sino-foreign joint venture entrustment of operation management contracts.
  • Approval of examination and ratification of a foreign partner’s advance recovery investment report.
  • Approval of extension of Sino-foreign joint venture cooperation period.
  • Temporarily cancel special requirements for foreign-invested enterprises to obtain certification of organization qualifications.

These adjustments open up and simplify the entry procedures for a significant amount of new sectors. The duration of temporary suspension and the cancellation of restrictive policies have not yet been disclosed, but it is safe to say that these adjustments signal further steps towards opening up investment into the trade zones, and will provide increased opportunities for foreign companies.

This article was published by our media partner Dezan Shira & Associates (www.dezshira.com)