Forward Moves on Negative Access

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A new draft of the Market Access Negative List on investment bans and restrictions will apply to both domestic and foreign companies

The new draft list will be piloted in Shanghai, Tianjin, Fujian and Guangdong, before being introduced nationwide in 2018.  In March, the National Development and Reform Commission (NDRC) in cooperation with the Ministry of Commerce released a draft plan of its Market Access Negative List, containing investment bans and limitations across a multitude of sectors from agriculture to media, banking to telecommunications. The new list will apply to both domestic and foreign companies and contains a total of 328 specific items, 96 of which are prohibited and 232 of which are restricted for investment. Businesses not covered in the draft document are presumed open for investment and will be allowed to establish companies through normal registration processes.

The new draft list will be retroactive with an effective start date of January 1, 2016, and will remain implemented until December 31, 2017. It will be piloted in four regions: Shanghai, Tianjin, Fujian and Guangdong, before being introduced nationwide in 2018. For regions and cities beyond Shanghai, Tianjin, Fujian and Guangdong, it is expected that the current Catalogue Guiding Foreign Investment (CGFI) will continue to be used until 2018 when the nationwide negative list comes into effect. The Market Access Negative List is an improvement on the CGFI, which outlines what sectors are open to foreign investment in China as well as those that are restricted; the new list applies equal treatment to both domestic and foreign investors and precludes interference by local governments. It is intended to create greater transparency and openness in the Chinese market, as well as foster increased competition among all existing players.

Apart from the Market Access Negative List, a key component of the US-China Bilateral Investment Treaty (BIT) negotiations has been a proposed negative list that would reduce the number of sectors and industries closed off to U.S. businesses, giving them wider access to the China market. Though China has yet to submit a new negative list proposal, having missed its own end-of-March deadline, both sides have vowed to continue to work together expeditiously to conclude talks and avoid the influence of the upcoming November U.S. presidential election.

The negative list approach was first implemented in the China (Shanghai) Pilot Free Trade Zone (Shanghai FTZ) in 2013. Unlike the new Market Access Negative List, the current Shanghai FTZ negative list contains 122 items that fall into 15 categories and 50 subcategories and applies only to foreign investors.

AmCham Shanghai has said it continues to strongly support the development of the Shanghai FTZ and China’s move towards the use of negative lists to open its markets to both foreign and domestic investment. While acknowledging the positive steps that have been taken, the Chamber has also expressed disappointment in the number and range of industries and sectors that are either prohibited or restricted under the negative list. The Chamber will continue to vigorously push for both the draft BIT and FTZ negative lists to be reduced so as to provide greater opportunities for foreign investment in Shanghai and China more broadly.

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