Recently, the National Development and Reform Commission (NDRC) and Ministry of Commerce (MOFCOM) of the People’s Republic of China (PRC) jointly released a draft of the new Foreign Investment Guidance Catalogue for public comment. The 2014 Draft Catalogue would retain the framework of classifying Chinese industries into “encouraged,” “restricted” and “prohibited” categories (industries not listed are “permitted”); however, it substantially reduces the restrictions on foreign investment currently in place. The 2014 Draft Catalogue would lift restrictions on foreign investment in dozens of service and general manufacture industries and would relax Chinese ownership requirements. Although foreign investors still would have to operate in some of these industries through Sino-foreign joint ventures, control by the Chinese partners would no longer be required. In addition, the 2014 Draft Catalogue would permit establishment of wholly foreign-owned enterprises (WFOEs) in a number of industries.
More WFOE-Permitted “Encouraged” Industries -
Under the 2011 Foreign Investment Guidance Catalogue (Current Catalogue), dozens of industries categorized as “encouraged” are subject to restrictions on the form of foreign investment or Chinese ownership requirements. Specifically, foreign investors in those industries are required to work with Chinese partners through joint ventures or partnerships. Certain “encouraged” industries also require more than 50% Chinese ownership.
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