April 28, 2011 |
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China - Draft of Revised Foreign Investment Catalogue
On 1 April 2011, the Legislative Affairs Office of China's
State Council (the "Office") released a consultation
draft of a revised Foreign Investment Industrial Guidance
Catalogue (the "Draft Revised Catalogue") which, if
adopted, would change the Foreign Investment Industrial
Guidance Catalogue (2007 version) (the "2007
Catalogue"). The public may provide comments on the
Draft Revised Catalogue before 30 April 2011.
Policies and Trends Behind Revisions
Against the background of the latest policy updates, the
Draft Revised Catalogue can be seen as part of the Chinese
government's efforts to implement the 12th Five-Year Plan
of National Economy and Society Development
《中华人民共和国国民经济和社会发展第十二个五年规划纲要》 (the "Plan")
published earlier this year, the State Council's Certain
Advices regarding Further Utilizing Foreign Investment
《国务院关于进一步做好利用外资工作的若干意见》 published on 6 April
2010 (the "Advice"), and other regulatory or
administrative measures that facilitate economic development
in China.
The Plan expressly lists seven "strategic emerging
industries" that are considered to be of primary importance to
national development. These industries include those
relating to (i) energy conservation and environmental
protection, (ii) new-generation information technology, (iii)
biotechnology, (iv) high-end machinery and equipment, (v) new
forms of energy, (vi) new materials, and (vii) "green
car". The Advice, among other initiatives, looks to
optimize the deployment of foreign investment and illustrates
a recent trend by China to further open certain service
industries to foreign investment.
New "Encouraged" Industries
The proposed revisions to the 2007 Catalogue, as set out in
the Draft Revised Catalogue, echo these policy updates and
trends. For example, there are now more "encouraged"
industries relating to the "strategic emerging industries" and
it may soon become easier for foreign investors to invest into
the venture capital, education and pharmaceutical
sectors. On the other hand, foreign investment will be
more restricted in other certain industries – for example,
under the Draft Revised Catalogue, foreign investors would be
prohibited from the business of developing luxury
villas.
Key Changes as Compared to the 2007 Catalogue
A) New "Encouraged Industries"
- Certain high-end machinery and equipment, including the
design and manufacture of:
(i) facilities for wind power generation, air pollution
control, water pollution control, and solid waste
disposal;
(ii) special production facilities for
automobile power batteries;
(iii) key accessories
and parts of green cars[1]; and
(iv) high technology
green batteries.
- Certain new materials – for example, R&D and
manufacture of materials for the use of aeronautics &
astronautics, automobile and environmentally friendly
materials;
- Certain new-generations of information technology – for
example, R&D and manufacture of telecommunication
facilities of next-generation internet systems, terminals,
monitoring, and software and chips;
- Venture capital;
- Intellectual property services; and
- Professional skills training.
B) New "Prohibited Industries"
- Construction and operation of luxury villas would change
from being "restricted" from foreign investments to being
"prohibited".
- Post office and express courier services would become
"prohibited" from foreign investments.
C) Less "Restricted" Industries
- Foreign investments in medical institutions would no
longer be restricted to investments in equity joint ventures
and cooperative joint ventures.
Orrick will continue to monitor developments in
this respect and provide further updates.
[1] It
should be noted that automobile manufacture and establishment
of auto R&D are no longer "encouraged" under the Draft
Revised Catalogue.
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