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New 2012 Investment Catalogue promotes foreign investment

Foreign investment in China is subject to the provisions of the Foreign Investment Industrial Guidance Catalogue. Investments in certain sectors are thus encouraged (by tax benefits), permitted to a limited extent (participation quotas) or prohibited (e.g. the defence sector). Investments in industries which are not listed in the catalogue are not restricted in some form.

China’s National Development and Reform Commission (NDRC) and the Chinese Ministry of Commerce (MOFCOM) recently issued a new investment catalogue for 2012.

In order to keep up with the global development of strategically important new industries (in particular in the area of renewable energies), the new catalogue is based on the objectives of the 12th Five Year Plan and is another step in the direction of market liberalization and easing of restrictions on foreign investment. The catalogue replaces the previous version from 2007 and shall apply to all applications from foreign investors from 30 January 2012.

China’s economic development shall be further accelerated by the targeted guidance of foreign investment. In particular, this shall be achieved through the subsidising of investments in strategically important areas such as technological innovations (such as in the field of electromobility, waste management and recycling technologies), industrial modernization, alternative energy and economically weak areas of China.

The new catalogue now promotes foreign investments in the modern service industry, for example services in relation to advice for start-up businesses and IP consulting. Further liberalisation of the healthcare sector is also positive. Foreign investors can now freely participate in medical institutions, such as hospitals, or financial leasing companies. However, the production of complete cars is no longer in the “promoted” category.

The new catalogue certainly offers foreign investors who are interested in the now promoted or the unrestricted sectors more investment opportunities. However, until the implementation of the new implementing rules it remains unseen how quickly the changes in the new catalogue can be effectively enforced.  It is not unlikely that the implementing rules will provide that certain industries which are now removed from the promoted category of the 2012 investment catalogue will be promoted again in the case of investments in economically weak regions.

Contact

Raymond Kok, Shanghai