The magnitude of the reduction of restricted entries for foreign investment is the first time since China promulgated the Catalogue for the Guidance of Foreign-invested Industries in 1995, and there is no lack of commendable points. But some of the industries that have lifted the restrictions are either overcapacity industries, or industries with higher environmental risks, and some involve traditional industries in China, so what impact will the opening up of foreign investment have?
-Unprecedented strength-
79 reduced to 35, entries greatly reduced
National Development and Reform Commission from 4 days of public comment on the "Guidance Catalogue for Foreign Investment Industries", greatly reduced restrictions on foreign investment in industrial entries, from the original 79 entries reduced to 35. Among the restrictions on the ratio of foreign investment, the number of restricted entries requiring "joint ventures and cooperation" has been reduced from 43 to 11, and the number of entries requiring "Chinese party control" has been reduced from 44 to 32.
Wang Dong, inspector of the Department of Utilization of Foreign Capital and Overseas Investment of the National Development and Reform Commission (NDRC), told the media that this revision of the list of encouraged categories of the directory maintains the continuity, stability and predictability, which I think is a signal that we are releasing a positive openness to foreign independent. In the past, we use the restricted category to organize foreign investors to eliminate backward production capacity, backward technology, this time we in accordance with the requirements of the domestic and foreign capital regulatory consistency of unified energy-saving and environmental protection technology standards, then I think this is to "pre-entry national treatment + negative list" this management model has taken a substantial step forward.
China first issued the "Industrial Guidance Catalog for Foreign Investment" in 1995, announcing in the form of regulations to encourage, restrict and prohibit foreign investment in China's industrial sectors. Since then, the catalog has been revised five times according to the actual economic and social development of China, and this is the sixth revision and the one that removes the most restricted items.
Wang Dong said the new Catalog is the largest in magnitude and openness among the previous revisions:
"Reducing the share ratio restrictions and reducing the restricted categories may greatly improve the facilitation of foreign investment. At the same time we are further simplifying and decentralizing, more than 90% of foreign investment projects have implemented the filing system, the scope of approval is getting smaller and smaller. Domestic and foreign capital regulation consistent for our next step to create a better environment for foreign investment has laid the foundation."
-Revised Points of View-
Focus on relaxing the service industry and general manufacturing
Compared with the previous 2011 edition, the newly revised "Guidance Catalogue for Foreign Invested Industries" focuses on liberalizing the service industry and general manufacturing, such as papermaking, automotive electronics, famous white wine, subway, e-commerce, finance companies, chain stores, import and export commodity inspection, and so on. Commodity inspection and other services and general manufacturing foreign investment access, replication and promotion of the Shanghai Free Trade Zone's negative list of pilot experience.
The National Development and Reform Commission said that the purpose of this revision is to adapt to the new situation of economic globalization, to proactively expand the opening up, change the way of foreign investment management, adjust and optimize the economic structure, and further increase the transparency of the principle of significantly reducing the number of entries in the restricted categories, to liberalize the limitations on the ratio of foreign shares, focusing on the promotion of manufacturing and services to open up to the outside world, and is conducive to the promotion of the international and domestic elements of the free flow of an orderly fashion. It is conducive to promoting the orderly and free flow of international and domestic factors, promoting reform through opening up, and accelerating the cultivation of new advantages in participating in and leading international economic cooperation and competition.
The revised catalog encourages foreign investment in modern agriculture, high-tech, advanced manufacturing, energy-saving and environmental protection, new energy, modern services and other areas, and encourages foreign investment in research and development, and promotes the organic combination of attracting capital, technology and intelligence. At the same time, all foreign investment share ratio provisions in principle to be set out in the catalog, the permissible category of projects do not impose share ratio restrictions on foreign investment.
Revised to cancel the foreign investment restrictions on the project mainly includes iron and steel, ethylene, oil refining, paper, coal chemical equipment, automotive electronics, lifting machinery, power transmission and transformation equipment, famous liquor, feeder railroads, subway, international maritime transportation, e-commerce, finance companies, insurance brokers, chain stores, the land into a piece of development, import and export commodities inspection, etc..
At the same time, the directory to further liberalize the foreign capital share capital restrictions, "joint venture, cooperation," the number of entries from 43 reduced to 11, "Chinese party holding" entries from 44 reduced to 32. The catalog also includes 36 banned foreign-invested industries such as weapons and ammunition manufacturing, ivory carving and air traffic control.
It is understood that the relevant units and people from all walks of life can log on to the National Development and Reform Commission portal () home page "Opinion Solicitation" column before December 3, 2014, and enter the "Revised Catalogue of Guidance for Foreign-Invested Industries" for public consultation. " section to provide comments and suggestions on the revised draft.
-Opinion Voices-
Will it exacerbate overcapacity and environmental pollution?
The consultation draft removes restrictions on foreign investment in heavy chemical industries such as iron and steel, ethylene, oil refining, paper making, coal chemical equipment, automotive electronics, lifting machinery, power transmission and transformation equipment, as well as in some areas such as pharmaceutical production.
While overcapacity exists to varying degrees in the fields of iron and steel, ethylene, oil refining and some pharmaceutical production, paper-making and other industries have huge environmental risks.
"For overcapacity and technologically backward industries, allowing foreign investment to enter can promote industrial structure upgrading through market competition. For example, China's steel production capacity is the world's largest, there is a serious overcapacity, but the high-end market is dependent on imports. The introduction of foreign investment can improve the technological content of the entire steel industry and intensify the elimination of backward industries, while reducing imports." Long Guoqiang, a researcher at the Development Research Center of the State Council, said.
Wang Dong, inspector of the National Development and Reform Commission's Department of Utilization of Foreign Capital and Overseas Investment, said liberalizing the restrictions on foreign investment in heavy and chemical industries is not about letting go of overcapacity or environmental pollution, but rather about transforming the way foreign investment is managed. "Domestic and foreign-funded enterprises are regulated by uniformly applying standards such as energy conservation, environmental protection and technology access, rather than distinguishing between foreign or domestic investment."
Will it hit domestic industries?
The exposure draft removes restrictions on foreign investment in the cultivation and breeding of famous liquor and Chinese herbal medicines, as well as in manufacturing industries such as railroads and subways.
In the previous catalog, famous liquor was listed as a restricted category because it involved traditional craftsmanship, and the planting and breeding of Chinese herbal medicines was limited to joint ventures and cooperation.
Long argued that the main markets for industries such as famous liquor and Chinese herbal medicine planting are at home. And industries such as urban rail transportation, the competitiveness of domestic enterprises has been very strong. These industries are fully capable of meeting the challenge of foreign investment, and there is no need to protect them through government restrictions.
Will it jeopardize economic security?
According to the consultation draft, restrictions on foreign investment in finance companies, insurance brokers, trust companies, land development, and import and export commodity inspection have been lifted. These industries involve land development and finance, will the liberalization of restrictions on foreign businessmen jeopardize national economic security?
Zhang Yansheng, secretary-general of the Academic Committee of the National Development and Reform Commission, said the new round of reform and opening up requires China to use a global vision for resource allocation. Some enterprises in China have already gone out to invest in real estate and financial sectors, which requires China's opening-up pattern to be relative to high international standards.
This year, the amount of China's foreign investment is expected to exceed the amount of foreign capital absorption. China's outward investment has become a global topic, and its investment scope encompasses manufacturing, infrastructure, energy and minerals, agriculture, service industry to cultural industry and other fields.
"China's foreign investment laws and regulations should not only consider bringing in, but also going out. A fair and transparent legal platform can create more overseas opportunities for Chinese companies to go out." Zhang Yansheng said.
Extended reading
Revision of the Catalogue of Industrial Guidance for Foreign Investment
The Catalogue of Industrial Guidance for Foreign Investment, which lists one by one the industries that are encouraged, restricted and prohibited for foreign investment, is an important policy basis for China's official guidance for foreign investment.
The person in charge of the National Development and Reform Commission (NDRC) introduced the four principles of the revision.
The first is to expand opening up, focusing on liberalizing access to foreign investment in the service industry and general manufacturing industry, and promoting reform and development through opening up. The revision of the catalog replicates and promotes the pilot experience of the China (Shanghai) Pilot Free Trade Zone, and even some areas that have not yet been opened up in the Shanghai FTZ have been opened up in the new catalog. For example, the new catalog deletes the entries for the production of yellow wine and famous white wine, and eliminates the requirement of Chinese party holding.
The second is to change the way of foreign investment management, give full play to the market's decisive role in resource allocation, strengthen energy conservation, environmental protection and other regulations, reduce the foreign share ratio regulations, and reduce the restricted catalog.
It is reported that in the past, through the catalog, Chinese officials restricted foreign investment to enter some high-energy-consuming as well as overcapacity industries. But the new revised catalog eliminates foreign investment restrictions on steel, ethylene, oil refining, coal chemical equipment and other areas, hoping to return the "hand of regulation" to the market.
Third, to adjust and optimize the economic structure. Encourage foreign investment in modern agriculture, high-tech, advanced manufacturing, energy conservation and environmental protection, new energy, modern services and other areas, and encourage foreign investment in research and development.
It is worth noting that the restrictions and prohibitions in the guidance catalog are the main basis for the future development of the "negative list". However, the catalog adds "encouraging categories" to the negative list, encouraging the introduction of foreign investment in some areas through preferential policies such as value-added tax credits and tariffs. In fact, the new catalog encourages projects involving more than 300 industries, far more than the restrictions and prohibitions catalog.
Fourth, it further increases transparency. In this newly revised catalog, all the provisions of the foreign investment ratio in principle are set out in the catalog, the permitted items do not restrict the foreign investment ratio, previously scattered in other provisions of the ratio are included in the catalog to consider.