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New Guidance for Foreign-Invested Industries

The Catalogue for the Guidance of Foreign Investment Industries (Catalogue 2007, amended in 2007), approved by the State Council, went into effect on December 1, 2007. Previous amendments were made in 1997, 2002, and 2004.

The catalogue has 478 clauses, including 351 clauses on encouraged foreign investment industries, 87 clauses on restricted foreign investment industries, and 40 clauses concerning prohibitions, which affected the following industries:

1.    Environmentally friendly industries are encouraged: this will contribute to sustainable economic development.

Catalogue 2007 encourages investment in the recycling economy, clean production, renewable energy, environmental protection and resource multipurpose utilization of resources. For the mining and quarrying industries exploiting rare metals and non-renewable resources, foreign investment is no longer encouraged or may even be prohibited. High-energy using, high-resources using, and high-pollution investments are restricted or prohibited.

2.  Banking and insurance industries are more open              to foreign investors.

Catalogue 2007 states that foreign stock shares of life insurance companies shall not exceed 50 percent; foreign investment on security companies shall not be more than one-third of the stock, and investment is limited to underwriting A stocks, underwriting and transactions of B stocks and government and enterprise bonds. The foreign share shall not exceed 49 percent in securities investment or bond management companies. Companies trading in futures can accept foreign investment if the Chinese party dominates in stock rights, which was prohibited in the catalogue’s 2004 amendment.

3.    More restrictions on real estate.

Catalogue 2007 increases the restrictions on real estate transactions in the second-grade market and medium and for brokerage companies; it deletes a restriction on the development of large-scale theme parks and maintains restrictions on the construction and operation of high-ranking hotels, villas, high-class office buildings and international exhibition centres.

4.    Restrictions on the supply and operation of power networks.

Catalogue 2004 prohibited the construction and operation of power networks, but Catalogue 2007 restricts the construction and management of conventional coal-fired power of condensing steam plants whose unit installed capacity is less than 300,000 kW within the small power grid in Xizang, Xinjiang, Hainan Province, and the coal-fired power of condensing-extraction steam plants with dual use unit cogeneration.

5.     Encouragement for the communications and transportation industries.

Catalogue 2007 encourages investment in comprehensive infrastructures needed to maintain “high-speed, inter-city and ordinary railways.” But, a Chinese party shall dominate in all share-holding.

6.    Catalogue 2007 guides foreign investment in advanced industries, thus enhancing prospects for Chinese industries.

Catalogue 2007 strengthens support for foreign investment in high-tech, equipment manufacturing and new-materials manufacturing industries and 522 other products lines that were previously regulated. Catalogue 2007 for the first time includes modern logistics and service outsourcing services. For some Chinese traditional industries that already have mature techniques, Catalogue 2007 no longer encourages foreign investment.

Wang Jihong , Lawyer

Professional fields: Urban Infrastructure

Development and

Real Estate

Environmental and Resource Protection

Government

Legal Affairs

Ms. Wang is a renowned lawyer in the field of urban infrastructure development in China. She has offered legal services to a number of national major construction projects, especially concession projects. These projects cover multiple fields, including public utilities construction projects, rail transportation projects, highway and bridge projects, energy projects and city planning projects such as CCTV New Site, The National Museum of China and the National Indoor Stadium.

Tel: +86 10 5870 0886  

E-mail: jwbj@jianweilawyer.com