NDRC and MOFCOM Releases New Negative List (2018 Edition)

On June 28, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) issued the Special Administrative Measures for the Entry of Foreign Investments (Negative List) (2018 Edition), which will take effect from July 28, 2018. The special administrative measures (the Negative List) specified in the Catalog of Industries Open to Foreign Investment (2017 Revision) shall be rescinded simultaneously.

 

The 2018 Negative List, consisting of 48 articles, down from originally 63 articles, expands market access in finance, transportation, commerce & trade, professional services, manufacturing, infrastructure, energy, resources and agriculture, totaling 22 opening measures. It provides a roadmap and timetable for opening the automobile and finance sectors, and grants grace periods to certain sectors in a bid to render the opening-up process more predictable.

 

Although the Chinese government claims that the new Negative List has expanded market access dramatically, trade experts have characterized these measures as minor steps unlikely to ease global criticism of Chinese trade practices. Indeed, the sectors China has chosen to open fall into two broad categories: those it has long promised to open due to an overall need for greater investment (finance, automobiles, etc.), and those in which state-run monopolies are so entrenched that foreign firms will be unable to compete (power grids, railways, etc.). Nevertheless, a select group large MNCs, particularly in the finance and auto sectors, will likely benefit from this announcement. Highlights include:

 

Opening the service industry. In the finance sector, China will cancel equity caps for foreign investment in banking, as well as relax foreign equity caps to 51% for securities firms, fund management companies, futures firms and life insurance companies. By 2021, China has promised to cancel all foreign equity caps in the finance sector. In the infrastructure sector, it will cancel foreign equity caps in main railway entities and power grid firms.

 

Make the manufacturing sector “basically open”. In the automobile sector, China will cancel foreign equity caps in special-purpose vehicle makers and new energy vehicle makers, and will cancel foreign equity caps in commercial vehicle makers in 2020. By 2022, China will cancel foreign equity caps in passenger vehicle makers, as well as the restriction that one foreign investor shall have no more than two joint ventures in China.