Negative list for foreign investment in pilot FTZs

In 2013, China (Shanghai) Pilot Free Trade Zone pioneered the application of a “negative list model” of foreign investment management in China.

As China continues to take big strides in its opening-up, the negative list for its pilot free trade zones (FTZs) has been shortened six times in eight years, from 190 items at the very beginning to 30 in 2020.

Now the negative list model is being rolled out nationwide. There are two negative lists, one for the pilot FTZs and one for the rest of the country.

In the latest versions as of 2020, pilot FTZs have made more breakthroughs than the rest of the country in the opening-up of ten areas. Those areas include agriculture, water-borne transportation, telecommunications, education and culture.

For example, according to the negative list for pilot FTZs, the Chinese shareholding ratio of the breeding and seed production of new corn varieties has been relaxed to no less than 34%, while the other list maintains that Chinese shareholders must keep a controlling stake.

In addition, the pilot FTZ version allows the establishment of cultural and artistic performance groups on condition that Chinese parties are controlling shareholders, while the national version still prohibits investment in this field; in pilot FTZs, wholly foreign-owned enterprises are permitted to establish academic vocational education institutions, but cannot yet do so in the rest area of the country.

The latest negative list for pilot FTZs has shrunk by seven items, 18.9% fewer than its predecessor. At the same time, foreign investment has wider access to the service industry and manufacturing sector, and is less limited in the fields of finance, infrastructure, and Chinese herbal medicine. Restrictions are now lifted in securities, futures, life insurance, water supply and drainage, air traffic control, and decocted Chinese medicine products.