Special Administrative Measures for Foreign Investment Access to Pilot Free Trade Zones (Negative List) (2020 Edition)

Special Administrative Measures for Foreign Investment Access to
Pilot Free Trade Zones (Negative List) (2020 Edition)

Notes

1. The Special Administrative Measures for Foreign Investment Access to Pilot Free Trade Zones (Negative List) (hereinafter referred to as the “Pilot FTZs Negative List”) uniformly set out special administrative measures for foreign investment access regarding equity requirements and requirements for senior management. Sectors not covered in the Pilot FTZs Negative List shall be subject to administration in accordance with the principle of equal treatment for domestic and foreign investments.

2. The Pilot FTZs Negative List has specific transition periods for certain sectors to eliminate or relax their investment restrictions, after which such restrictions shall be duly eliminated or relaxed.

3. Overseas investors are forbidden to engage in investment activities as owners of individual businesses, investors of sole proprietorships, or members of farmers' professional cooperatives.

4. In the course of performing their duties in accordance with the law, the relevant competent authorities shall refuse to handle a license application, business registration, or any other related matter for any overseas investor intending to invest in a sector covered in the Pilot FTZs Negative List but not in compliance with the provisions of the Pilot FTZs Negative List; and refuse to handle the relevant approval matters if the approval involves any fixed-asset investment project. Overseas investors shall not establish foreign-invested partnerships when investing in sectors with equity requirements.

5. After being examined by the relevant competent authority under the State Council and reported to the State Council for approval, specific foreign investments are not required to be subject to the provisions of the Pilot FTZs Negative List on the relevant sectors.

6. Mergers and acquisitions of affiliated domestic companies by overseas companies legally established or controlled by domestic companies, enterprises, or natural persons thereby shall be handled in accordance with the relevant provisions on foreign investments, overseas investments, and foreign exchange administration.

7. Measures concerning administrative examination and approval, qualification requirements, and national security in such sectors as culture and finance, which are not set out in the Pilot FTZs Negative List, shall be governed by existing provisions.

8. Where the Mainland and Hong Kong Closer Economic Partnership Arrangement and its follow-up agreements, the Mainland and Macao Closer Economic Partnership Arrangement and its follow-up agreements, the Cross-Straits Economic Cooperation Framework Agreement and its follow-up agreements, and any international convention or treaty of which China is a contracting state or to which China has acceded, set out provisions on access treatment for overseas investors that are more preferential, such provisions shall prevail.

9. The Pilot FTZs Negative List shall be construed by the National Development and Reform Commission and the Ministry of Commerce in concert with the relevant authorities.

Special Administrative Measures for Foreign Investment Access to
Pilot Free Trade Zones (Negative List)
(2020 Edition)

I. Agriculture, Forestry, Animal Husbandry, and Fishery

1. The Chinese party shall hold no less than 34% of shares in the breeding of new varieties of, and production of the seeds of, wheat and corn.

2. Investment in research and development, cultivation, and plantation of Chinese rare and unique precious fine varieties, as well as production of the relevant propagative materials (including excellent genes in planting, animal husbandry, and aquaculture industries), shall be prohibited.

3. Investment in the breeding of genetically modified varieties, and the production of genetically modified seeds (fingerlings), of crops, breeding stock and poultry, and aquatic fingerlings shall be prohibited.

II. Mining

4. Investment in rare earth, radioactive minerals, the exploration of tungsten, as well as the mining operation and mineral processing shall be prohibited. (Entering the mining site of rare earth, acquiring the geological data of the mine, mineral samples, and production technology shall be prohibited unless express permission is given.)

III. Manufacturing

5. The Chinese party shall hold no less than 50% of shares in automotive body manufacturing industry except for specialized vehicles, new-energy vehicles, and commercial vehicles, while the same foreign investor could establish two or less equity joint venture company manufacturing similar automotive body products. (In 2022, the limit to the share the foreign party holds in passenger car manufacturing as well as the restriction that the same foreign investor could establish two or less equity joint venture company manufacturing similar automotive body products shall be eliminated.)

6. Production of satellite television broadcasting ground receiving facilities and key components.

IV. Production and Supply of Electricity, Heat, Gas, and Water

7. For construction and operation of nuclear power plants, the controlling stake shall be held by the Chinese party.

V. Wholesale and Retail

8. Investment in wholesale and retail of tobacco, cigarettes, re-dried leaf tobacco, and other tobacco products shall be prohibited.

VI. Transport, Warehousing, and Postal Industries

9. The controlling stake in domestic water transportation companies shall be held by the Chinese party. (Additionally, measures including operating or chartering Chinese ships or shipping space disguised to run domestic water transportation and its auxiliary business shall be prohibited; water transportation operators shall not use foreign ships to operate domestic water transportation business. Nevertheless, once approved by the Chinese government, under the circumstances that no domestic Chinese ships could meet the requirements for applying permission for transportation, and that the places where ship calls at are ports or waters open to the public ports or waters, water transportation operators may, within the time limit and the voyage specified by the Chinese government, use temporarily foreign ships to operate between Chinese ports of maritime transport and towing.)

10. The controlling stake in public air transportation companies shall be held by the Chinese party, and the investment ratio of a foreign investor and its affiliate(s) shall not exceed 25%, and the legal representative shall be a Chinese citizen. The legal representative of a general aviation company shall be a Chinese citizen; the general aviation companies serving the agricultural, forestry, and fishery industries shall be limited to the form of equity joint venture; the controlling stake in other general aviation companies shall be held by the Chinese party. (Only Chinese public air transportation companies can operate domestic air services and provide regular and irregular international air services as designated carriers in China.)

11. For construction and operation of civil airports, the comparative controlling stake shall be held by the Chinese party. The foreign party may not participate in the construction and operation of the airport tower.

12. Investment in postal companies (including the operation of postal services) as well as the domestic express delivery business for letters shall be prohibited.

VII. Information Transmission, Software, and Information Technology Services

13. Telecommunication companies: limited to the telecommunication services opened up in China’s WTO commitments, the foreign party shall hold no more than 50% of shares in value-added telecommunication services (except for e-commerce, domestic multi-way communications, store and forward, and call center). For the basic telecommunications business, the controlling stake shall be held by the Chinese party. The policy of the original area of Shanghai Pilot FTZ (28.8 square kilometers) shall be extended to all Pilot FTZs.

14. Investment in Internet news and information services, Internet publishing services, Internet audio-visual program services, Internet cultural operations (except for music), and Internet public information release services (except for those contents opened up in China’s WTO commitments) shall be prohibited.

VIII. Leasing and Commercial Services

15. Investment in Chinese legal affairs (except for provision of information on impact on Chinese legal environment) shall be prohibited, and an overseas investor shall not become a partner of a domestic law firm. (Foreign law firms may only enter China in the form of representative offices, and shall not employ Chinese practicing lawyers, the supporting staff employed shall not provide legal services for clients; if representative offices or station representatives are sent or established in China, they shall be permitted by the judicial administrative organs in China.)

16. Market surveys are limited to the forms of equity joint venture, among which the controlling stake in radio and television ratings surveys shall be held by the Chinese party.

17. Investment in social surveys shall be prohibited.

IX. Scientific Research and Technical Services

18. Investment in the development and application of human stem cells, gene diagnosis, and treatment technologies shall be prohibited.

19. Investment in humanities and social science research institutions shall be prohibited.

20. It is prohibited to invest in geodetic surveying, marine surveying and mapping, aerial photography for surveying and mapping, ground motion surveying, and surveying and mapping of administrative boundaries; preparation of topographic maps, world administrative area maps, national administrative area maps, maps of administrative areas at or below the provincial level, national teaching maps, local teaching maps, and true three-dimensional maps and electronic navigation maps; and regional geological mapping, mineral geology, geophysics, geochemistry, hydrogeology, environmental geology, geological disasters, remote sensing geology, and other surveys (mining right holders are not subject to these special administrative measures when carrying out work within the scope of their mining rights).

X. Education

21. Pre-schools, ordinary high schools, and education institutions of higher learning are subject to Sino-foreign cooperative education and must be led by the Chinese party (the president or the chief executive shall have Chinese nationality, and at least half of the members of the council, board or joint administrative committee shall be Chinese members). Foreign educational institutions, other organizations or individuals shall not establish schools and other educational institutions (excluding vocational training institutions out of and within and the educational system) targeted at Chinese citizens, but foreign educational institutions can cooperate with Chinese educational institutions to establish educational institutions with Chinese citizens as their main target students.

22. Investment in compulsory education institutions or religious education institutions shall be prohibited.

XI. Health and Social Work

23. Medical institutions are limited to the form of equity joint venture.

XII. Cultural, Sports, and Entertainment Industries

24. Investment in news organizations (including but not limited to news agencies) shall be prohibited. (The establishment of permanent news organizations by foreign news agencies in China and the dispatch of permanent correspondents to China shall be subjected to the approval of the Chinese government. News services provided by foreign news agencies in China shall be approved by the Chinese government. Business cooperation between Chinese and foreign news organizations must be led by the Chinese party and approved by the Chinese government.)

25. Investment in editing, publishing, and production of books, newspapers, periodicals, audio-visual products, and electronic publications shall be prohibited. (Yet Chinese and foreign publishing bodies may carry out cooperative publishing projects with the Chinese government’s approval while ensuring the Chinese parties’ authority in operation and final approval of the content, and that the additional conditions approved by the Chinese government are fully complied with.. Without the approval of the Chinese government, the provision of financial information services in China shall be prohibited.)

26. Investment in various levels of radio stations (outlets), television stations (outlets), radio and television channels (frequencies), and radio and television transmission networks (transmitter stations, relay stations, radio and television satellites, satellite uplink stations, satellite receiving stations, microwave stations, surveillance stations, cable radio and television transmission networks, etc.) shall be prohibited. And engagement in the video on demand business of radio and television and in the provision of installation services for ground receiving facilities for satellite television broadcasting shall be prohibited. (The landing of foreign satellite channels shall go through examination and approval.)

27. Investment in companies producing and operating radio and television programs (including introduction) shall be prohibited. (The introduction of foreign film and television series as well as the introduction of other foreign television programs by satellite transmission of the units shall be declared by bodies designated by National Radio and Television Administration. Chinese-foreign cooperation in the production of television series (including television animation) shall be licensed.)

28. Investment in film production companies, distribution companies, cinema companies, and film introduction shall be prohibited. (With approval, Chinese-foreign cooperation in film production could be permitted.)

29. Investment in auction companies for heritage auction, heritage stores, and state-owned heritage museums shall be prohibited. (Transferring, mortgaging, and leasing to foreigners the immovable cultural relics and cultural relics prohibited to leave the country shall be prohibited. The establishment and operation of investigative bodies aiming for intangible cultural heritage shall be prohibited; intangible cultural heritage investigation as well as the archaeological investigation, exploration, excavation conducted by foreign organizations or individuals in China shall take the form of cooperating with China and go through specialized examination and approval.)

30. For cultural and artistic performance groups, the controlling stake shall be held by the Chinese party.

Note: The English version is for reference only. For more information, please refer to the Chinese authoritative version.