In 2016, the Ministry of Commerce of China (MOFCOM) announced its ‘13th Five-Year (2016-2020) Plan for Commercial Development’ (the Plan), in which MOFCOM placed the highest emphasis on the importance of foreign investment. The Plan specifically states that, during the 12th five-year plan, actual utilised foreign investment increased by 13.5 per cent in comparison with the 11th five-year plan, reflecting China’s steady growth and position in global economics. The government is also determined to increase foreign investment for the societal good. Despite the instability in world trade and global economy, Chinese government emphasised in many occasions that it still welcomes foreign investment and is firmly committed to protecting the lawful rights and interests of foreign businesses in China.
According to the Plan, MOFCOM aims to fully implement the management system of pre-establishment national treatment (PENT) with a negative list to create a more investment-friendly and convenient environment and legal framework. It is MOFCOM’s belief that such practice will mark the start of further reform and enable China to embrace the international rules and common practices more efficiently. In addition, reform of foreign investment regulation is also decreed. To enforce negative-list review and reduce the number of approvals to minimum extent ought to be MOFCOM’s priority, with one eye on promoting equal treatment and fair competition between foreign and domestic enterprises. Under this objective, the government intends to replace ‘approval-oriented regulation’ with ‘filing management’, which only requires the foreign investment in the fields of the negative list to go through the procedures of approval, making foreign investment simpler and faster. This revision is considered to be the core of China’s recent reform of foreign investment regulation, and it is the amendment of China’s foreign-investment laws (the Law on Wholly Foreign-owned Enterprises, the Law on Sino-foreign Equity Joint Ventures, the Law on Sino-foreign Co-operative Enterprises and the Law on the Protection of Investment by Taiwanese Compatriots) that herald the start of deregulation.
The negative list management system has been reformed with the goal of expanding marketing access to foreign investment. Pursuant to the Regulations on Foreign Investment Guidelines (State Council  No. 346), foreign investment in China is divided into four categories: encouraged; restricted; prohibited; and permitted (which refers to those that do not fall into the first three categories) and the former three categories are included in the Catalogue of Industries for Guiding Foreign Investment (the Catalogue) updated by the National Development and Reform Commission (NDRC) and MOFCOM periodically. The 2017 Catalogue (NDRC and MOFCOM’s Order  No. 4, effectuated on 28 July of the same year) superseded the 2015 Catalogue and amended the structure of the Catalogue to two main sections: Encouraged Catalogue and the Special Management Measures (Negative List) for the Access of Foreign Investment. In 2018, instead of updating the negative list in the 2017 Catalogue, NDRC and MOFCOM jointly released the Special Management Measures (Negative List) for the Access of Foreign Investment (NDRC and MOFCOM’s Order  No. 18, effectuated on 28 July of the same year (the 2018 Negative List)) for the first time that superseded the negative list in the 2017 Catalogue.
Comparing with the negative list in the 2017 Catalogue, the 2018 Negative List decreased the number of items that require special managing measures from 63 to 48 and further expanded market access of foreign investments in several fields, including finance, transportation, energy, resource and agriculture, etc. One major change is the 2018 Negative List cancelled the two categories of restrictive items and prohibited items and listed the special management measure for each item separately.
The scope of application of the negative list released by NDRC and MOFCOM is nationwide except the Pilot Free Trade Zone delimited by the State Council. The Pilot Free Trade Zone in China abides by the Special Management Measures (Negative List) for the Access of Foreign Investment in the Pilot Free Trade Zone (NDRC and MOFCOM’s Order  No. 19, effectuated on 30 July of the same year), which has three fewer items than the 2018 Negative List and adopts an approach of loosening restrictions to some specific items.
For specific implementing regulation, the new filing management is largely covered by the Provisional Measures on Administration of Filing for Establishment and Change of Foreign Investment Enterprises (amended on 30 July 2017 by MOFCOM Order  No. 2 and on 29 June 2018 by MOFCOM Order  No. 6, the Measure). A major change made by the MOFCOM amendment in 2018 as an effort to simplify the procedures is the filing for establishment could be conducted online simultaneously using the same documents while applying for the business licence. The filing for change should be conducted online within 30 days after the change. The materials and information required are scaled down significantly, and the authorities will not conduct a substantive review. The pre-establishing supervision is replaced with post-oversight to lessen the burden of foreign investors while maintaining the effectiveness of the laws. Furthermore, article 11 of the Measure states that the relevant authorities must complete the filing review in three days (reduced from between 45 and 90 days). Some believe that 95 per cent of investments in future will be eligible for the filing management.
China is in the process of drafting the Foreign Investment Law of the People’s Republic of China, which is included in the State of Council Legislation Plan for 2018 (issued by the General Office of State Council  No. 15). The Foreign Investment Law, currently being drafted by MOFCOM and NDRC jointly, is believed to be a symbol of a new foreign investment era in China.
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