China reduces 27 restrictions for foreign investment in Free Trade Zones

30 June 2017

On Friday, 16 June 2017, China announced a significantly trimmed Free Trade Zone (FTZ) negative list. Originally created in 2013 with 190 items, the list sought to restrict foreign investment in China’s 11 FTZs, protecting domestic companies from foreign competition. 

With 27 items across eight sections now removed, the new list consists of 95 items, compared to 122 in 2015, 139 in 2014, and 190 in 2013. According to the government, the list will be further reduced in the future to foster investment.

Even though China is a highly attractive market for foreign investors, restrictive regulatory and legal frameworks combined with a lack of transparency dampened outside interest. By loosening the traditional constraints in mining, manufacturing, transportation, information, commercial service, finance, scientific research, and culture sectors, the world’s second-largest economy is attempting to encourage further investment into the country. For example, manufacturers of rail transportation equipment and civilian satellites are not longer required to enter joint ventures with a Chinese partner in order to operate in a FTZ; and the finance industry will benefit from the loosening of regulations that previously prohibited foreign companies from underwriting government bonds. 

Another industry influenced by this update is the theme park industry. As theme park visitors are predicted to surpass 330 million by 2020, restrictions of foreign investments in large-scale theme park projects have been lifted in the new negative list. This opens up the possibility for new investments for theme parks under development ,-and would-be theme park developers will no longer have to enter a joint venture with Chinese partners or let the Chinese partner take the majority share in order to establish an attraction.

Vistra is dedicated to helping foreign enterprises enter the China market, including in FTZs, with professional consulting and high quality tailored services. Vistra services in China include business advisory, company formation, financial control and accounting, HR advisory and payroll, tax compliance, and company secretarial services.