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15 september 2020

China is further opening up its economy

The restrictions on foreign ownership are relaxed or cancelled in the fields of finance, manufacturing and agriculture, which signifies China’s efforts to further open up the economy and improve its business environment especially with regard to Covid 19.

The new restrictions are laid down in the new Special Administrative Measures for foreign investment access (the “negative list”) jointly issued by The National Development and Reform Commission (“NDRC”) of PRC and the Ministry of Commerce (“MOFCOM”). The new rules came into effect on July 23, 2020. The negative list also includes a separate list specifically applicable to the Free Trade Zones (“FTZ negative list”).

Compared with the 2019 edition, the number of special management measures for foreign investment access is reduced from 40 items to 33 items. The FTZ Negative List is reduced from 37 items to 30 items.

Highlights

The highlighted changes are as follows.

  • Service industry
    • In the financial sector, foreign ownership caps on securities companies, fund management companies, futures and life insurance companies were lifted.
    • In the field of infrastructure, foreign investors are allowed to take majority shares in joint ventures that engage in the building and operation of water supply and drainage networks in cities with a population of more than 500,000.
    • In the transportation sector, regulations prohibiting foreign investment in air traffic control were abolished, and the provisions on civil airport entry were adjusted.
  • Manufacturing and agriculture
    • In the manufacturing sector, the restrictions on foreign shares in commercial vehicle manufacturing were lifted, and the provisions prohibiting foreign investment in the smelting and processing of radioactive mineral and nuclear fuel production were also abolished.
    • In the field of agriculture, the ownership limit on foreign investors in the breeding of new wheat varieties and seed production is raised up to 66%.
  • Others
    • In the medicine sector, the prohibition of foreign investment in ready-to-use traditional Chinese medicine was abolished.
    • In the education sector, foreign investors are allowed to run wholly owned vocational education institutions.

Further information

If you need further information, please do not hesitate to contact our Asia team: Joost Vrancken Peeters at +31620210657 or jvp@lgga.nl or Ye Yu at +31639267995 or y.yu@lgga.nl.