China: 2014 Negative List for the Shanghai Free Trade Zone … v0 30... · 2019. 10. 28. · China:...
Transcript of China: 2014 Negative List for the Shanghai Free Trade Zone … v0 30... · 2019. 10. 28. · China:...
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater liberalisation? 1
21 August 2014
China: 2014 Negative List for the Shanghai Free
Trade Zone – Fulfilling the promise of greater
liberalisation?
China first introduced a negative list approach1 to foreign investment in the
China (Shanghai) Pilot Free Trade Zone (the “Zone”) in September 2013 (the
“2013 Negative List”).
To fulfil its commitment to shorten the 2013 Negative List, which was partly a
response to foreign investor and other stakeholder feedback, on 30 June
2014 the Shanghai municipal government unveiled a revised negative list (the
“2014 Negative List”). Compared to its previous incarnation, the 2014
Negative List contains foreign investment restrictions in 139 as opposed to
190 sectors, and reforms a significant number of the restrictions that remain.
We summarise the key reforms below and, for ease of reference, have set
out the details of the reforms in Appendix 1. Although in the context of the
national rules and unanswered questions facing foreign investment in the
PRC, the impact of certain changes in the 2014 Negative List may, on the
whole, have less impact than at first glance, a number of the revisions are
nonetheless expected to be of interest to foreign investors.
Services sectors
The main changes in the services sectors include:
Transportation – it is the Shanghai municipal government’s objective to
develop the Zone into an international shipping centre. Following this
policy, the 2014 Negative List introduces significant relaxation of the
restrictions facing foreign investors in the shipping industry, consolidating
and further developing the reforms released in February this year2.
Changes from the 2013 Negative List include (i) foreign investors can
hold a controlling stake in a Sino-foreign maritime transport joint venture
that engages in non-Chinese maritime transportation business; (ii) foreign
investors are now allowed to set up wholly foreign-owned entities to load
and unload cargo for international maritime freight transport, container
1 Establishment in the Zone of foreign-invested entities in industries that do not appear on the
negative list will generally only require a filing with the Shanghai municipal government and will no longer require prior foreign investment approvals from the Ministry of Commerce and National Development and Reform Commission.
2 Implementation measures announced on 8 February 2014 on the relaxation of certain
restrictions on foreign ownership of international shipping transportation and international shipping management businesses: http://www.moc.gov.cn/zfxxgk/bnssj/syj/201402/t20140208_1573450.html.
Contents Services sectors ............... 1
Manufacturing sectors ...... 3
Other changes .................. 3
Looking ahead .................. 4
Appendix – Summary of reforms .............................. 5
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 2
station and container yard businesses and railway cargo transport
companies; (iii) the maximum permitted foreign shareholding in public
international shipping agency businesses is increased to 51%; and (iv)
foreign investors are allowed to invest in up to 49% of road service
stations through equity or cooperative joint ventures.
Healthcare – the 2014 Negative List no longer requires minimum foreign
investment of RMB20 million or imposes a limit of 20 years on the
operational term of foreign-invested medical institutions. This change may
encourage foreign investors to set up small-scale medical institutions
within the Zone. However, as the reference to medical institutions
remains in the 2014 Negative List, it is not clear whether the less
burdensome post-investment notification regime, which was implemented
as part of the negative list approach, applies to foreign investment in
medical institutions within the Zone. Nevertheless, it was reported on 18
July that a German investor intends to commence construction this year
of the first wholly foreign-owned hospital to be opened in the Zone3.
Retail – the 2013 Negative List restricted foreign investment in direct
selling business, again without specifying the scope of the restriction. The
2014 Negative List clarifies that a foreign investor may invest if (i) the
foreign investor has more than three years of experience in direct selling
in an overseas market; and (ii) the actual paid-in registered capital of the
foreign-invested company is not less than RMB80 million. In addition,
mail-order selling has been removed from the 2014 Negative List and the
foreign investment restriction on online retailing no longer applies to
general merchandise.
Financial services – reference to finance companies, trust companies
and currency brokerage companies has been removed from the 2014
Negative List. Further, the 2014 Negative List no longer states that
“investment in micro-credit companies and financing guarantee
companies shall comply with relevant regulations”. However, the 2014
Negative List includes a new statement that “investment in banking
institutions must comply with the existing regulations”. “Banking
institutions” are generally taken to mean those financial institutions that
are regulated by the China Banking Regulatory Commission (such as
finance companies, trust companies, currency brokerage companies,
micro-credit companies and financing guarantee companies), which
means that, despite the above change, effectively no reform in the
banking sector has been introduced.
Telecommunication – the 2013 Negative List restricted foreign
investment in telecommunication, radio, TV and satellite transmission.
The 2014 Negative List clarifies that foreign investment in basic
telecommunication services is allowed but foreign shareholding is capped
3 http://sh.people.com.cn/n/2014/0718/c355748-21706340.html.
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 3
at 49%. Foreign investment in the broadcasting and satellite transmission
sectors remains prohibited.
Real estate – investment in real estate agents or brokerage firms has
been removed from the 2014 Negative List although, in reality, the impact
of this reform may be limited, as the market is already highly competitive
among domestic players. The 2014 Negative List also permits wholly
foreign-owned project companies established within the Zone to develop
tracts of land. However, further guidance from the authorities is required
as to whether these project companies may develop projects outside the
Zone.
Manufacturing sectors
Reforms in the manufacturing sectors mainly focus on high-tech sectors and
encourage R&D:
Vessel manufacturing – the 2014 Negative List enables foreign
investors to set up wholly foreign-owned companies in the Zone that
specialise in design of luxury cruise vessels, a sub-sector which is widely
believed to have huge growth potential in the Chinese market.
Aircraft and aeronautics equipment manufacturing – the 2014
Negative List allows foreign investors to set up wholly foreign-owned
companies within the Zone to engage in design and manufacture of aero-
engine related components.
Other reforms – some other changes include (i) removal of pulp and
paper manufacturing from the 2014 Negative List; (ii) allowing foreign
investors to invest in manufacturing of marine engineering equipment
through wholly foreign-owned entities, removing the previous requirement
for a Chinese partner to be the controlling shareholder; and (iii) allowing
foreign investors to set up wholly foreign-owned entities for investment in
manufacturing, research and development of automobile electronics,
automobile electronic bus-network technology, electronic controls in
electric power steering systems and wheeled and crawler cranes in
excess of 400 tonnes.
Other changes
Hong Kong and Macau investors – the 2014 Negative List introduces
reforms for Hong Kong and Macau investors to establish theatres without
a controlling Chinese partner and to provide certain air transportation
ground services through a wholly-owned entity. These reforms are not
applicable to non Hong Kong or Macau investors.
Consolidation – some changes are also attributable to consolidation of
related items. For example, the geological survey sector is now combined
with the oil and natural gas exploration sector in the 2014 Negative List.
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 4
Looking ahead
There is no doubt that the 2014 Negative List is substantially shorter than the
2013 Negative List, yet it remains to be seen whether this shortened list can
bring substantial changes to the current foreign investment regime applicable
in the Zone. On one hand, out of the items removed, only about one-third
actually remove foreign investment restrictions, as opposed to consolidating
them or expressing them in a different way. On the other hand, the impact of
the reduced negative list may also be limited by the geographical limitation of
the Zone and the fact that it remains, in some cases, unclear whether Zone
enterprises (for example project companies as mentioned above) can
conduct business outside the Zone. Nevertheless, the attempt of the
Shanghai municipal government to increase the transparency of its negative
list (as shown by the reforms of the 2013 Negative List) and its promise to
keep its negative list continuously updated are to be welcomed and give hope
for further liberalisation of the Chinese market, albeit currently at a slower
pace than foreign investors may desire.
One repeated criticism from market participants of the negative list approach
has been that neither the 2013 Negative List nor the 2014 Negative List
generally provide a one-stop record of foreign investment restrictions in the
Zone. Both lists need to be read in conjunction with the Catalogue of
Industries for Guiding Foreign Investment (the “Catalogue”) and the rules of
industry regulatory bodies. For certain sectors (such as gambling), although
these have been removed from the 2014 Negative List, these reforms do not
mean that foreign investors are now given a “green light” to invest in these
sectors; rather, as these sectors are already restricted to both domestic and
foreign investors by Chinese law, they are not repeated in the 2014 Negative
List. Amid this and the other uncertainties described above, foreign investors
still do not have, in the 2014 Negative List, a one-stop source of guidance on
whether their potential investment can benefit from foreign investment
reforms allowed in the Zone. Interestingly, however, State leaders seem to
have taken note of market concern through indications that a nationwide
negative list will be formulated (without specifying the exact timing), which will
govern foreign investment and provide for equal access to the Chinese
markets in such a way that could replace the Catalogue4.
4 http://news.xinhuanet.com/fortune/2014-07/08/c_126725145.htm.
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 5
Appendix – Summary of reforms
1 Restrictions removed from the 2014 Negative List
The following restrictions in the 2013 Negative List have been
removed from the 2014 Negative List:
Industry Category Removed item as it appeared in 2013
Negative List Head Category Sub-Category1 Sub-Category2
A
Agriculture,
Forestry, Animal
Husbandry and
Fishery
4. Foreign investment is
restricted in processing
of cotton (seed cotton).
B
Mining Industry
B07 Oil and Gas
Mining
4. Chinese-foreign
equity or contractual
joint venture is required
for foreign investment in
development and
application of enhanced
oil recovery and
relevant new
technologies.
5. Chinese-foreign
equity or contractual
joint venture is required
for foreign investment in
development and
application of new
technologies for oil
exploration and
exploitation in areas
such as geophysical
prospecting, drilling,
well logging, mud
logging, and down-hole
operation.
C
Manufacturing
Industries
C22
Papermaking and
Paper Products
C221 Pulp
Manufacturing
C222
Papermaking
Chinese-foreign equity
or contractual joint
venture is required for
single production line for
chemical wood pulp with
an annual production
capacity of 300,000
tonnes or more or single
production line for
chemi-mechanical wood
pulp with an annual
production capacity of
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 6
Industry Category Removed item as it appeared in 2013
Negative List Head Category Sub-Category1 Sub-Category2
100,000 tonnes or
more, mainly using
overseas timber
resources, and the
production lines for
high-grade paper or
paperboard built
simultaneously.
C25 Petroleum
Processing,
Coking and
Nuclear Fuel
Processing
C251 Refined Oil
Products
Manufacturing
Foreign investment is
restricted in
atmospheric and
vacuum refinery
production with an
annual output below 10
million tonnes, catalytic
cracking production with
an annual output below
1.5 million tonnes,
continuous reforming
production (including
aromatics extraction)
with an annual output
below 1 million tonnes,
and hydrogen cracking
production with an
annual output below 1.5
million tonnes.
C26
Manufacturing of
Chemical Raw
Materials and
Chemical
Products
C264
Manufacturing of
Paints, Inks,
Dyes and Similar
Products
Foreign investment is
restricted in production
of benzidine, dyes and
paints.
C27
Pharmaceutical
Industry
C272 Production
of Chemical
Medicine
Formulations
Foreign investment is
restricted in production
of chloramphenicol,
penicillin G, jiemycin,
gentamicin,
dihydrostreptomycin,
amikacin, totomycin,
oxytetracycline,
mydecamycin,
kitasamycin,
ciprofloxacin,
norfloxacin , ofloxacin,
analgin, paracetamol,
vitamin B1, vitamin B2,
vitamin C, vitamin E,
multiplex vitamin
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
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Industry Category Removed item as it appeared in 2013
Negative List Head Category Sub-Category1 Sub-Category2
preparations, and oral
calcium preparations.
C28 Chemical
Fiber
Manufacturing
Industry
C282 Production
of synthetic fibre
Foreign investment is
restricted in production
of chemical fibre
drawnwork of
conventional chipper, as
well as viscose fibre.
C32 Non-ferrous
Metals Smelting
and Rolling
Processing
Industry
C321 Common
Non-ferrous
Metals Smelting
Foreign investment is
restricted in smelting of
electrolytic aluminium,
copper, lead, zinc and
other non-ferrous
metals.
C323 Rare Earth
Metals Smelting
1. Foreign investment is
restricted in smelting of
rare earth metals like
tungsten, molybdenum,
stannum (except tin
compounds) and
antimony (including
antimony oxide and
antimony sulphide).
C34 Common
Purpose
Equipment
Manufacturing
Industry
C343
Manufacturing of
Material Handling
Equipment
1. Chinese-foreign
equity or contractual
joint venture is required
for manufacturing of
wheeled and crawler
cranes not less than
400 tonnes.
C345
Manufacturing of
Axletrees, Gears
and
Transmission
Parts
Foreign investment is
restricted in
manufacturing of all
kinds of general (p0)
axletrees, accessories
(steel balls, cages) and
roughs.
C35 Special-
Purpose
Equipment
Manufacturing
C351
Manufacturing of
Mining
Metallurgical and
Construction
Equipment with
Special Purpose
2. Chinese parties shall
be controlling
shareholders for foreign
investment in marine
engineering equipment
(including modules).
C355
Manufacturing of
Textile, Clothing
Leather
Foreign investment is
restricted in
manufacturing of
equipment for ordinary
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
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Industry Category Removed item as it appeared in 2013
Negative List Head Category Sub-Category1 Sub-Category2
Processing
Equipment with
Special Purpose
dacron filament and
short fiber.
C37 Railway,
Vessel,
Aerospace and
Other
Transportation
Equipment
Industries
C373
Manufacturing of
Vessels and
Retailed Devices
1. Chinese-foreign
equity or contractual
joint venture is required
for foreign investment in
design of luxury cruise
ships.
C375
Manufacturing of
Motorcycles
2. Chinese-foreign
equity or contractual
joint venture is required
for foreign investment in
manufacturing of key
parts and components,
as well as electronically-
controlled fuel injection
technology for high-
emission (>250ml)
motorcycles.
D Power, Heat,
Gas and Water
Production and
Supply
Industries
D 44 Power and
Heat Production
and Supply
2. Foreign investment is
restricted in construction
and operation of power
plants using coal-fired
and steam
condensation thermal
generator sets with a
single generator
capacity of 300,000
kilowatts or less and
thermoelectric power
stations using coal-fired,
steam condensation
and extraction thermal
generator sets with a
single generator
capacity of 100,000
kilowatts or less within
small grids.
4. Foreign investment is
prohibited in
construction and
operation of power
plants using coal-fired
and steam
condensation thermal
generator sets with a
single generator
capacity of 300,000
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 9
Industry Category Removed item as it appeared in 2013
Negative List Head Category Sub-Category1 Sub-Category2
kilowatts or less and
thermoelectric power
stations using coal-fired,
steam condensation
and extraction thermal
generator sets with a
single generator
capacity of 100,000
kilowatts or less outside
small grids.
F Wholesale
and Retail
Industries
F51 Wholesale
Industry
F511 Wholesale
of Agriculture,
Forestry, Animal
Husbandry
Products
Foreign investment is
restricted in purchase of
grains, and wholesale
and distribution of
grains and cotton.
F 52 Retail
Industry
F524 Special
Retail of Cultural
and Sports
Products and
Apparatuses
2.Except for the case
where the service
providers from Hong
Kong and Macau are
permitted to distribute
audio-visual products
(including post-cinema
products) in a single
ownership, equity or
contractual joint venture
way, all investors from
other countries and
regions are restricted to
make investment in
distribution of audio-
visual products
(excluding
films) (limited to
contractual joint
venture).
G
Transportation,
Warehousing
and Postal
Service
Industries
G 53 Railway
Transportation
Industry
G 532 Railway
Freight
Transportation
Foreign investment is
restricted in railway
freight transport
companies (limited to
Chinese-foreign equity
or contractual joint
ventures).
G 55 Water
Transportation
Industry
G553 Auxiliary
Activities for
Water
Transportation
1. Chinese-foreign
equity or contractual
joint venture is required
for foreign investment in
loading and unloading
of international
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 10
Industry Category Removed item as it appeared in 2013
Negative List Head Category Sub-Category1 Sub-Category2
shipments, international
maritime container
freight station and
container yard services.
G 56 Air
Transportation
Industry
G 563 Auxiliary
Activities for Air
Transportation
2. Chinese parties shall
be controlling
shareholders for foreign
investment in aircraft
maintenance(with an
obligation to accept
tasks from international
maintenance market)
and aviation fuel
projects.
5. Except for the case
where the service
providers from Hong
Kong and Macau are
allowed to establish
wholly-owned air
transportation agencies,
Chinese-foreign equity
or contractual joint
venture is required for
the investment from
other countries or
regions in air
transportation agencies.
J Financial
Industry
J69 Other
Financial
Industries
J691
Financial Trust
and Management
4. Foreign investment in
micro-credit companies
and financing guarantee
companies shall be in
line with relevant
regulations.
K Real Estate
Industry
K 70 Real Estate
Industry
K701 Real Estate
Development and
Operation
1.Foreign investment is
restricted in
development of tracts of
land (limited to Chinese-
foreign equity or
contractual joint
ventures).
L Leasing and
Commercial
Service
Industries
L71 Leasing
Industry
L712 Cultural
and Daily
Commodities
Rental
1. The proportion of
investment by one
service provider from
Hong Kong and Macau
in chain operation of
books, newspapers and
periodicals rental shall
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 11
Industry Category Removed item as it appeared in 2013
Negative List Head Category Sub-Category1 Sub-Category2
not exceed 65%, and
the investment from
other countries and
regions in chain
operation of books,
newspapers, and
periodicals shall not
account for a majority
percentage if the
number of chain stores
is greater than 30.
2. Except for the case
where the service
providers from Hong
Kong and Macau are
permitted to rent audio-
visual products
(including post-cinema
products) in a single
ownership, equity or
contractual joint venture
way, all investors from
other countries and
regions are restricted
from investing in rental
of audio-visual products
(excluding films) (limited
to contractual joint
venture).
R Cultural,
Sports and
Entertainment
Industries
R87 Cultural and
Arts
Industries
Foreign investment in
cultural and arts
industries shall meet
related requirements.
R89
Entertainment
R891
Indoor
Entertainment
Activities
Foreign investment is
prohibited in business
premises for Internet-
access services
(cybercafé).
R893
Lottery Activities
Foreign investment is
prohibited in gambling
and lottery industry
(including horse race
tracks for gambling
purposes).
R899
Other
Entertainment
Activities
Foreign investment is
prohibited in
pornography industry.
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 12
2 Restrictions relaxed in the 2014 Negative List
The foreign investment restrictions in the following sectors have been
relaxed in the 2014 Negative List as shown in the table below:
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
C
Manufacturing
Industries
C15
Liquor,
Beverage,
Refined Tea
Manufacturing
C153 Refined
Tea
Processing
Foreign
investment is
prohibited in
processing of
green tea and
special tea with
Chinese
traditional
techniques
(including
famous teas
and dark teas).
Chinese
parties shall be
controlling
shareholders
in processing
of green tea;
Foreign
investment is
prohibited in
processing of
special tea
with Chinese
traditional
techniques
(including
famous teas
and dark teas)
C35 Special-
Purpose
Equipment
Manufacturing
C351
Manufacturing
of Mining
Metallurgical
and
Construction
Equipment
with Special
Purpose
3. Foreign
investment is
restricted in
manufacturing
of bulldozers of
320
horsepower or
less, hydraulic
excavators of
30 tonnes or
less, wheeled
loaders of 6
tonnes or less,
graders, road
rollers and
forklifts of 220
horsepower or
less,
electrically
driven off-
highway dump
trucks of 135
tonnes or less,
hydro-
mechanically
No change,
except that the
restrictions do
not apply to (i)
hydraulic
excavators of
below 15
tonnes and (ii)
wheeled
loaders of
below 3
tonnes.
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 13
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
driven off-
highway dump
trucks of 60
tonnes or less,
asphalt
concrete
mixing and
paving
equipment,
high-altitude
operation
machinery,
garden
machinery and
tools, and
ready-mixed
concrete
machinery
(pilot pumps,
agitating
lorries, mixing
stations, and
pump trucks).
C36
Automobile
Industry
C366
Manufacturing
of Vehicle
Parts and
Accessories
1.
Manufacturing
and research
and
development of
automobile
electronic
devices:
Chinese-
foreign equity
is required for
foreign
investment in
automobile
electronic bus
network
technologies
and electronic
controllers for
electric power
steering
system, and
Chinese-
foreign equity
or contractual
1. Chinese-
foreign equity
or contractual
joint venture is
required for
foreign
investment of
manufacturing
and research
and
development
in embedded
electronic
integrated
systems.
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 14
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
joint venture is
required for
foreign
investment in
embedded
electronic
integrated
systems.
C37 Railway,
Vessel,
Aerospace
and Other
Transportation
Equipment
Industries
C371Manufact
uring of
Railway
Transportation
Equipment
C372
Manufacturing
of Urban Track
Transportation
Equipment
Chinese-
foreign equity
or contractual
joint venture is
required for
foreign
investment in
track
transportation
equipment,
including
research and
development,
design, and
manufacturing
of vehicles and
key parts and
components
(traction drive
system, control
system, and
brake system)
of
transportation
equipment for
high-speed
railway, special
lines for railway
passenger
transportation,
intercity
railway, trunk
railway, and
urban track
transportation;
research and
development,
design, and
manufacturing
of service
Chinese-
foreign equity
or contractual
joint venture is
required for
foreign
investment in
track
transportation
equipment,
including
research and
development,
design, and
manufacturing
of vehicles and
key parts and
components
(traction drive
system, control
system, and
brake system)
of
transportation
equipment for
high-speed
railway,
special lines
for railway
passenger
transportation,
intercity
railway, trunk
railway, and
urban track
transportation;
research and
development,
design, and
manufacturing
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 15
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
facilities and
equipment for
high-speed
railway, special
lines for railway
passenger
transportation,
intercity
railway, and
urban track
transportation;
design and
research and
development of
relevant
information
systems during
information
technology
development;
research and
development,
design, and
manufacturing
of track and
bridge facilities
for high-speed
railway, special
lines for railway
passenger
transportation
and intercity
railway;
research and
development,
design, and
manufacturing
of track
transportation
signal systems;
manufacturing
of electrified
railway
equipment and
apparatus,
research and
development of
railway noise
of service
facilities and
equipment for
high-speed
railway,
special lines
for railway
passenger
transportation,
intercity
railway, and
urban track
transportation;
design and
research and
development
of relevant
information
systems during
information
technology
development;
research and
development,
design, and
manufacturing
of track
transportation
signal
systems;
research and
development
of railway
noise and
vibration
control
technology,
and
manufacturing
of railway
transportation
safety
monitoring
equipment.
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 16
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
and vibration
control
technology,
manufacturing
of waste
discharge
equipment for
railway
passenger
trains, and
manufacturing
of railway
transportation
safety
monitoring
equipment.
C375
Manufacturing
of Motorcycles
1. The
proportion of
the shares held
by Chinese
parties in a
Sino-foreign
joint venture of
motorcycles
shall be 50% or
more. One of
the legal
persons of the
Chinese party
shall be
relatively
controlling
shareholder
owning shares
more than the
amount held by
their foreign
counterparts
when a listed
joint-stock
company of
motorcycles
sells corporate
shares to
external
parties. A
foreign
company that
No change
except that the
requirement
for Chinese
control does
not apply to
motorcycles
with emissions
of below
250ml.
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 17
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
is allowed to
establish up to
2 joint ventures
in China
producing the
same type of
motorcycles is
permitted to
establish more
than 2 joint
ventures by
acquiring other
domestic
companies
together with
Chinese parties
in a joint-
venture way.
C38 Electric
Machinery and
Equipment
Manufacturing
C381
Manufacturing
of Motors
2. Chinese-
foreign equity
or contractual
joint venture is
required for
foreign
investment in
manufacturing
of power
transmission
and
transformation
equipment:
amorphous
alloy
transformers,
operating gears
for high-voltage
switches of 500
kilowatts or
more, arc-
control devices,
large disc
insulators
(1,000 KV, 50
KA or more),
outlet devices
and sleeves
used for 500
KV or more
No change,
except that a
joint venture is
not required
for foreign
investment in
contact
materials for
electrical
appliances in
conformity with
EU RoHS
Directive, and
Pb-free and
Cd-free
solders.
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 18
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
transformers
(500, 750 and
1,000 KV AC
and all
specifications
for DC),
voltage
regulating
switches (on-
load or no-load
voltage
regulating
switches of
500, 750 and
1,000 KV AC),
dry-type
smoothing
reactors for
direct current
transmission,
converter
valves for ±800
KV direct
current
transmission
(water coolers
and DC field
equipment),
contact
materials for
electrical
appliances in
conformity with
EU RoHS
Directive, and
Pb-free and
Cd-free
solders.
F Wholesale
and Retail
Industries
F51
Wholesale
Industry
F512
Wholesale of
Foods,
Beverages
and Tobacco
Products
1.Foreign
investment is
restricted in
wholesale and
distribution of
vegetable oil,
sugar and
tobacco.
2. Foreign
investment is
1.Foreign
investment is
restricted in
wholesale and
distribution of
tobacco.
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 19
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
prohibited in
wholesale of
salt.
F516
Wholesale of
Mineral
Products,
Building
Materials and
Chemical
Products
Foreign
investment is
restricted in
wholesale and
distribution of
crude oil,
fertilizers,
agricultural
chemicals,
agricultural
plastic film,
product oil
(including
bounded oil).
Foreign
investment is
restricted in
wholesale and
distribution of
crude oil,
fertilizers,
agricultural
chemicals,
agricultural
plastic film,
bounded oil.
F 52 Retail
Industry
F521 General
Retail
Foreign
investment is
restricted in
retail and
distribution of
cotton, crude
oil, agricultural
chemicals,
agricultural
plastic film, and
fertilizers (in
the case of
selling products
of different
varieties and
brands from
multiple
suppliers
through more
than 30 chain
stores, the
Chinese parties
shall be
controlling
shareholders).
No change,
except that the
restriction
does not apply
to agricultural
chemicals and
agricultural
plastic film.
F522 Special
Retail of
Foods,
Beverages
and Tobacco
Products
Foreign
investment is
restricted in
retail and
distribution of
grains, cotton,
No change,
except that the
restriction
does not apply
to grains,
cotton,
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 20
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
vegetable oil,
sugar and
tobacco (in the
case of selling
products of
different
varieties and
brands from
multiple
suppliers
through more
than 30 chain
stores, the
Chinese parties
shall be
controlling
shareholders).
vegetable oil
and sugar.
F529 Booth,
Non-Store or
Other Retails
Foreign
investment is
restricted in
direct sales,
mail orders and
online sales.
Foreign
investment is
restricted in
direct sales;
the investors
shall possess
more than
three-year
experience in
overseas
direct sales,
and the actual
paid-up
registered
capital shall be
no less than
RMB80 million.
Foreign
investment is
restricted in
online sales
(excluding
online sales of
general
merchandise).
G
Transportatio
n,
Warehousing
and Postal
G 54 Road
Transportation
Industry
G 542 Road
Passenger
Transportation
Foreign
investment is
restricted in
road passenger
transport
companies
No change,
except that the
49% cap only
applies to
scheduled
transportation,
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 21
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
Service
Industries
(limited to
Chinese-
foreign equity
ventures), the
proportion of
foreign
investment
shall not
exceed 49%,
and at least
one of the
major investors
shall be a
company that
has been
operating road
passenger
transportation
service in
China for 5 or
more years.
tourism
transportation
and package
transportation.
G 55 Water
Transportation
Industry
G 551 Water
Passenger
Transportation
G 552Water
Freight
Transportation
Foreign
investment is
restricted in
water transport
companies
(Chinese
parties as
controlling
shareholders),
and Chinese
parties shall be
controlling
shareholders
for foreign
investment in
scheduled or
non-scheduled
international
marine
transportation
services.
Foreign
investment is
restricted in
water transport
companies
(Chinese
parties as
controlling
shareholders),
and foreign
investment in
scheduled or
non-scheduled
international
marine
transportation
services shall
be limited to
Chinese-
foreign equity
or contractual
joint ventures.
G553 Auxiliary
Activities for
Water
Transportation
2. Foreign
investment is
restricted in
vessel
agencies
No change,
except that the
maximum
permitted
foreign
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 22
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
(Chinese
parties as
controlling
shareholders).
shareholding
in a public
international
shipping
agency is
51%.
G 56 Air
Transportation
Industry
G 563
Auxiliary
Activities for
Air
Transportation
1. Except for
service
providers from
Hong Kong and
Macau, the
proportion of
investment
made by
investors from
other countries
and regions in
auxiliary
aviation
services shall
meet the
requirements of
foreign
investment
percentage,
and the
operation
period shall not
exceed 30
years.
3. Foreign
investment in
civil aviation
computer
booking
systems is
prohibited,
other than by
Hong Kong or
Macau
investors in
joint ventures
controlled by
Chinese
mainland
investors.
1. Except that
Hong Kong
and Macau
investors can
invest in
agency
services,
upload &
download
controlling
service,
communication
& off-harbor
controlling
system
service,
container
equipment
management
service,
passenger &
luggage
service, cargo
& mail service,
tarmac
service, and
aircraft service
by setting up
wholly-foreign
owned
companies,
investors from
other countries
and regions
can only invest
in auxiliary
aviation
services by
entering into
joint ventures
with Chinese
partners.
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 23
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
3. Foreign
investment in
civil aviation
computer
booking
systems is
prohibited,
other than by
service
providers from
WTO member
states in
accordance
with a free
trade zone
agreement
with China, in
joint ventures
controlled by
Chinese
mainland
entities and
where a
Chinese
mainland
computer
booking
system service
provider is a
party. The
investment
must satisfy an
economic
needs test.
I Information
Transmission,
Software and
IT Service
Industries
I63
Telecommunic
ation, Radio&
Television and
Satellite
Transmission
Services
I631
Telecommunic
ation
I632 Radio&
Television
Transmission
Services
1.Foreign
investment is
restricted in
telecommunica
tion, radio&
television and
satellite
transmission
services.
1.Foreign
investment is
restricted in
basic
telecommunica
tion service
(the proportion
of the foreign
shareholding
shall not
exceed 49%).
J Financial
Industry
J66 Monetary
and Financial
1.Foreign
investment is
restricted in
1.Foreign
investment in
banking
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 24
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
Services
J67 Capital
Market
Services J68
Insurance
Industry
J69 Other
Financial
Industries
banks, financial
companies,
trust
companies,
and currency
brokerage
companies
financial
institutions
shall meet
related
requirements.
K Real Estate
Industry
K 70 Real
Estate
Industry
K701 Real
Estate
Development
and Operation
2. Foreign
investment is
restricted in
construction
and operation
of high-class
hotels, high-
class office
buildings,
international
exhibition
centers, large-
scale
agricultural
products
wholesale
markets.
2. Foreign
investment is
restricted in
construction
and operation
of high-class
hotels, high-
class office
buildings,
international
exhibition
centers by
means of
project
companies.
K703 Real
Estate
Intermediary
Services
Foreign
investment is
restricted in
real estate
secondary
market
transactions
and real estate
intermediary or
brokerage
companies.
Foreign
investment is
restricted in
real estate
secondary
market
transactions by
means of
project
companies.
M Scientific
Research and
Technical
Services
M74
Professional
Technical
Services
M744
Surveying and
Mapping
Services
2. Foreign
investment is
prohibited in
geodetic
surveying,
marine
charting, aerial
photography
for surveying
and mapping
purposes,
2. Foreign
investment is
prohibited in
geodetic
surveying,
marine
charting, aerial
photography
for surveying
and mapping
purposes,
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 25
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
administrative
boundary
surveying and
mapping,
topographic
map
compilations
and general
map
compilations,
and
compilations of
electronic
maps for
navigation
purposes.
administrative
boundary
surveying and
mapping,
topographic
map
compilations,
global
administrative
map, national
administrative
map, regional
(at or beneath
province level)
administrative
map, national
educational
map, regional
educational
map, and real-
3D map
compilations,
and
compilations of
electronic
maps for
navigation
purposes, as
well as other
mapping
activities
stipulated by
mapping
administrations
of State
Council.
Q Healthcare
and Social
Works
Q 83
Healthcare
The amount of
foreign
investment in
medical
institutions
shall not be
less than RMB
20 million, no
branch is
permitted to be
established,
and the
No branch is
permitted to be
established by
a foreign-
invested in
medical
institution.
China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater
liberalisation? 26
Category Item in 2013
Negative List
Revised item
in 2014
Negative List Head
Category
Sub-
Category1
Sub-
Category2
operation
period shall not
exceed 20
years.
R Cultural,
Sports and
Entertainment
Industries
R86
Radio,
Television,
Film and
Studio
Production
Industries
1.Foreign
investment is
restricted in
construction
and operation
of movie
theaters
(Chinese
parties as
controlling
shareholders).
1.Unless the
service
provider is a
Hong
Kong/Macau
investor,
foreign
investment is
restricted in
construction
and operation
of movie
theatres
(Chinese
parties as
controlling
shareholders).
China: Revised Negative List for Shanghai Free Trade Zone – Fulfilling the promise of greater liberalisation? 27
This publication is intended merely to highlight issues and not to be comprehensive, nor to provide legal advice. Should you have any questions on issues reported here or on other areas of law, please contact one of your regular contacts, or contact the editors.
© Linklaters. All Rights reserved 2014
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A18376577
Contacts
For further information please
contact the following or your
usual Linklaters contacts:
Fang Jian Partner (+86) 21 2891 1858 [email protected]
Richard Gu Senior Consultant (+86) 21 2891 1839 [email protected]
Annabella Fu van Bijnen Partner (+86) 10 6535 0660 [email protected]
Bryan Chan
Senior Counsel (+86) 21 2891 1811 [email protected]
Eric Liu
Counsel (+86) 21 2891 1841 [email protected]
Linklaters LLP Shanghai Office
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Reference: Special Administrative Measures (Negative List) on Foreign
Investment Access to the China (Shanghai) Pilot Free Trade Zone (2014
Amendments) (中国(上海)自由贸易试验区外商投资准入特别管理措施(负面
清单)(2014 年修订))
Issuing authority: Shanghai municipal government
For our previous publications regarding the Zone, please refer to:
“Shanghai Free Trade Zone implements modern arbitration rules”
“One Step Closer to Liberalisation – Formal Unveiling of the Shanghai Free
Trade Zone’s Free Trade Account”
“Shanghai Free Trade Zone’s New Foreign Exchange Regime”
“Internalisation of the RMB in the Shanghai Free Trade Zone – A Step Forward”
“Shanghai Free Trade Zone opens to foreign investment in telecoms services”
“The Shanghai Free Trade Zone opens up to foreign investment in value added
telecoms services”
“PBOC to liberalise capital flows in the Shanghai Free Trade Zone”
“Shanghai Free Trade Zone – a powerful springboard to China’s commodities
markets”
“SAIC Issues Registration Rules for the Shanghai Free Trade Zone”
“Launch of the Shanghai Pilot Free Trade Zone”