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China to open more sectors to foreign investment

Lan Lan
Updated: Nov 5,2014 7:20 AM     China Daily

China has proposed cutting by more than half the number of sectors restricted or off limits to foreign investors.

After one month for soliciting opinions, the new guidelines will be submitted to the State Council and are expected to come into force by the end of the year, said Wang Dong, deputy director general of the Department of Foreign Capital and Overseas Investment under the National Development and Reform Commission.

The new draft, which is posted on the NDRC website, decreases the number of restricted sectors from 79 to 35.

Sectors with reduced restrictions include steel, ethylene, refining, papermaking, coal chemical equipment, automotive electronics, lifting appliances, electric transmission and transformation equipment, branch railway lines, subways, international ocean shipping, e-commerce, finance companies and chain stores, according to officials at the NDRC.

“The new version of the catalogue will further facilitate foreign investment, and it shows our strong commitment to opening up and optimizing the investment environment for foreign investors,” Wang said.

In addition, the number of sectors currently limited to joint ventures and partnerships has been cut from 43 to 11, while those requiring a majority Chinese investment have been cut from 44 to 22.

The requirement of having a Chinese investment has been cancelled in sectors such as papermaking enterprises, automotive electronics and yacht design and manufacturing, according to the NDRC.

Zhang Jianping, senior researcher at the Institute for International Economic Research under the NDRC, said the latest changes have been made against a backdrop that more cities might open free trade zones similar to the one in Shanghai.

Wang said the move will better emphasize the market’s role.

Modern agriculture, high technology, advanced manufacturing, energy efficiency and environmental protection, new energy and modern service industries are encouraged, he said.

From January to September, the value of China’s foreign direct investment decreased by 1.4 percent to $87.3 billion from the same period the year before.

The draft axes the number of sectors that limit foreign investment from 79 to 35 and cuts the number of items that demand Chinese investors hold a larger share from 44 to 32.

In this round, the catalogue will see the most revisions in its history in terms of cutting restrictions on foreign investment, said Wang Dong, an official with the National Development and Reform Commission.

China started issuing the catalogue in 1995 and has been revising it every three years. The current version was issued in 2011.

The draft no longer limits foreign investments in sectors such as steel, ethylene, oil refining, paper making and premium spirits. Some of the sectors have faced production overcapacity.

For such sectors, more foreign investment can help boost industrial upgrading, said Long Guoqiang, a researcher with the Development Research Center of the State Council.

For example, China’s steel output ranks the first in the world, but the country has to import a lot of high-end steel products, Long said, adding that allowing more foreign investment into the steel sector will help bring more technology as well.

The draft also lists 349 sectors that welcome foreign investment, including vocational training, homes for seniors and services for children and the disabled.