The system of China's "negative lists"

Anyone who wants to commence new business activities in China and anyone who is already engaging in business activities in China, will have heard about China’s “negative lists”.

The negative lists are the first hurdle that foreign investors need to take on their way into the Chinese market. They include the "dos” and “don'ts” for foreign investments for every industry in China.?

In today’s video, we will explain the system of the negative lists and show why it is important for foreign investors to always look out for the newest versions of these lists.?

The system of the negative lists was gradually introduced by the Chinese government beginning from 2013. The lists were first rolled out in the various Free Trade Zones throughout China and later also on a national level.

The idea of the negative lists is simple: On the one hand, every industry that is not included in the negative lists, is generally open for foreign investment and foreign investors in these industries will be treated equally as domestic investors. ?

On the other hand, every industry that is included in the negative lists, is either prohibited or restricted for foreign investment.?

While prohibited means that no foreign investment by any means is allowed in the respective industry, for example investments in news agencies or postal companies, restrictions can appear in various forms.?Two common forms are the requirement to involve Chinese shareholders or management personnel to a certain degree.

Now, how many negative lists are there??In the first line, there are two negative lists that are only applicable for foreign investors: One of these negative lists is for investments in the areas of the 18 different Free Trade Zones in China, for example in Shanghai, Tianjin or Fujian. And the second negative list is for investments in all other regions of China.

Following review of either of these two lists, depending on the destination region, and granted that the target industry is not prohibited for foreign investments, a third negative list awaits in the second line: The Market Access Negative List.

This list, however, is applicable for both foreign and domestic investors and it includes all general regulations and requirements for every industry in China. For example, licenses that are required in certain manufacturing industries.

Lastly, it is important to know that all of the just mentioned negative lists are renewed annually or bi-annually. And even for investors that have already established their business in China, it is worth looking out for the newest lists, to see if restrictions in their industries have been loosened and new opportunities for investments have been created.?