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Asia in Focus

April 28, 2011



Orrick's Asia Private Equity Practice

Covering all aspects of the private equity business cycle from fund formation, regulatory issues and capital raising, to investment, company representation and management, and exits via listings or trade sales, Orrick's Asia private equity team represents global private equity investors on a wide range of activities across the Asia-Pacific region. Clients include Mount Kellett Capital, One Equity Partners, PineBridge Capital (formerly AIG Investments) and Warburg Pincus.

For information, please contact:

Maurice Hoo
Partner, Hong Kong
[email protected]
+852 2218 9130

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.