State Council Releases Second Circular on Foreign Investment Promotion

On August 16, the State Council released another set of measures to emphasize the importance of foreign investment, Circular of the State Council on Some Measures to Promote Foreign Investment Growth (Circular 39). This is the second circular released in 2017 related to foreign investment promotion, demonstrating China’s efforts to promote further opening of the market. 
Earlier this year, the State Council released Circular 5 laying out 20 measures to promote market openness, ensure fair competition in the market, and to attract foreign investment. The measures addressed market access, foreign investment, free trade zone, fair competition, standardization, government procurement, and IPR protection, among others. 
Similar to Circular 5, Circular 39 stresses five main areas related to foreign investment:

  • Reduce restrictions on foreign investment. Specifically, the practice of negative lists and further market access opening in alternative energy vehicles, vessels, public internet access sites, call centers, banking, securities and insurance.
  • Develop financial incentives to encourage foreign investors to expand investment in China. Utilize foreign investment to invest in high-tech, high value-added servicing industries. Encourage foreign firms to set up regional headquarters in China and to move to Western and Northeastern regions of China.
  • Improve the overall investment environment in national development zone. Grant national development zones administrative power within a certain scope, and enhance supportive services for the industry and value chain.
  • Facilitate foreign talent with easier work and residence permits.
  • Improve business environment in eight aspects: legal system, market order, currency flow, bureaucracy, M&A policies, IPR protection, R&D environment, and stabilize investment policies. 

So far, there has not been much progress resulting from Circular 5 in telecoms, computing, and Internet (TCI). The revised Foreign Investment Catalogue 2017 and Special Administrative Measures for Admittance of Foreign Investments to FTZs (Negative List), both released this year, opened up service, manufacturing and mining, industries mentioned in State Council Circular 5. But neither deducted any measures in the telecoms and Internet industries. In terms of standardization, SAC is working on a set of guidelines to allow better foreign participation in the standardization work as a follow up action to Circular 5.