China Publishes 2017 Negative List for FTZs

On 5 June 2017, the General Office of the State Council distributed the Special Administrative Measures for Foreign Investment Access in the Pilot Free Trade Zones (Negative List) (2017 Version). The new negative list will take effect 10 July and replace the current negative list applicable in China's pilot free trade zones (“FTZs”), which was released in 2015.

The 2017 list comprises 95 special management measures divided among 15 industry sectors and 40 sub-sectors and applies to foreign investment in China's 11 FTZs.

This represents a reduction of 27 measures and ten sub-sectors compared with the 2015 FTZ negative list. Specifically, the 2017 list removes or relaxes some restrictions on foreign investment in the following industries:

  • Mining.
  • Manufacturing.
  • Transportation services.
  • Information technology services.
  • Financial services.
  • Leasing and commercial services.
  • Education.
  • Culture, sports and entertainment.

Foreign invested businesses in the FTZs that seek to operate in a sector subject to special management measures must undergo the traditional examination and approval procedure previously applicable to all foreign investment.

Market Reaction

Sherry Gong, Consultant, Hogan Lovells, Beijing

"The 2017 FTZ negative list reflects China's intention to further open up to and attract additional foreign investment. Although the new list liberalises market access for foreign investment in the abovementioned sectors, foreign investment in critical business sectors such as financial services, education and telecommunications still remain subject to significant barriers to market entry."

Action Items

Counsel for foreign businesses in the mining, manufacturing, transportation services and the other newly opened industry sectors will want to closely study the 2017 FTZ negative list to determine if any new investment opportunities are available through incorporating entities in the FTZs and pay particular attention to any special management measures that apply in their sector. Counsel for all foreign businesses with operations in or eyes on China will want to be aware of this development generally.