DetailsOn June 24, 2020, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOC) jointly issued two ¡°negative lists¡±, both of which will take effect on July 23, 2020. The two Negative Lists refer to the Special Administrative Measures on Access to Foreign Investment (2020 edition) and the Free Trade Zone Special Administrative Measures on Access to Foreign Investment (2020 edition), which will replace their respective 2019 versions. These two negative lists enumerate the industries where foreign investment will either be prohibited or restricted. Foreign investors will be given more freedom in the service, manufacturing and agricultural sectors based on the newly released negative lists for 2020.
Negative list is a management model of foreign investment established in China and legalized by the Foreign Investment Law of the People's Republic of China, which comes into effect on January 1, 2020. It refers to special administrative measures for the access of foreign investment in certain industries or areas. The Chinese government gives national treatment to foreign investment beyond the negative list, which is issued by or upon approval by China's central government, the State Council. Industries not on the list are open for investment to all businesses and will not require pre-approval by the Chinese government.
For four years in a row, the two new negative lists have continued to reduce the number of measures limiting access for foreign investment. Compared to the 2019 negative lists, the new 2020 National Negative List has cut the number of restrictive measures by 17.5 percent from 40 to 33, and the new 2020 FTZ Negative List has cut the measures by 18.9 percent from 37 to 30.
The foreign investment law in force early this year clarifies the implementation mechanism of the negative list of foreign investment access and stipulates that foreign-invested enterprises can enjoy the same favorable policies as domestic companies and be treated equally in standard-setting and government procurement activities in fields except for the negative list.
With rising labor wages and other manufacturing costs, more investors are starting to cast their eyes on China¡¯s huge market base and high-end manufacturing. The liberalization facilitated by the 2020 new negative lists will facilitate this trend. The new lists also signal a new level of opening-up ¨C they will boost foreign investor confidence in China as well as accelerate structural upgrades to the existing supply chains in the country. Looking forward, the negative lists can be expected to be shortened further.