Alerts and Updates

The State Council of China Issues New Circular to Expand Opening Up and Attracting Foreign Capital

March 6, 2017

After many years reforming and upgrading the process of opening up and investment convenience, China has gradually become one of the major destinations for global cross-border investment.

On January 17, 2017, the State Council of China issued the Circular of Several Measures for the Expansion of Opening-up and the Active Use of Foreign Investments (“the Circular”). This is another piece of good news for foreign investors, following close on the heels of the issuance of the Resolution of Amending Four Laws including the Law of the People’s Republic of China on Wholly Foreign-Owned Enterprises (“the Resolution”) on September 3, 2016, which simplified the procedure of establishment and change of foreign-invested enterprises (“FIE”).

As is widely known, foreign capital plays an important role in the basic policies of opening up to the outside world and in the open economic system. Among developing countries, China has been a leading country for foreign investment since 1993, steadily rising up the ranks. After many years reforming and upgrading the process of opening up and investment convenience, China has gradually become one of the major destinations for global cross-border investment. 

The key points of the Circular include:

1. Revising the Catalog of Industries for Guiding Foreign Investment (2015 Revision) and loosening the restrictions on the entry of foreign investment in industries such as service, manufacturing, mining, etc.

The service industry will focus on easing entry for banking financial institutions, securities companies, securities investment fund management companies, futures companies, insurance companies and insurance intermediaries, opening entries for accounting and auditing, architectural design and rating services, and promoting the orderly opening up of the field of telecommunication, internet, culture, education, transportation, etc.

The manufacturing industry will focus on eliminating restrictions in the fields of rail transportation equipment manufacturing, motorcycle manufacturing, ethanol fuel production and oil processing.

The mining industry will focus on relaxing the entry requirements for the field of unconventional oil and gas (including, but not limited to oil shale, oil sands and shale gas) and mineral resources. Regarding the co-operation project of oil and natural gas, the procedure has been changed from approval to record-filing.

2. Creating a more fair competitive environment

All authorities shall strictly implement relevant policies and regulations and shall not increase restriction on FIEs without authorization. Unless otherwise stipulated in the laws and regulations or where it is necessary to require foreign investors to provide information, relevant authorities shall act in accordance with the uniform standards to review the application of FIEs’ business licenses and qualifications.

FIEs can be listed on the Main Board, Small and Medium-Sized Enterprise Board, Growth Enterprise Market, National Equities Exchange and Quotations and can be financed through the issuance of corporate bonds, convertible bonds and non-financial institution debt financing tool products.

3. Further attracting foreign investment

Local governments are allowed to enact preferential policies within the scope of legal authorization to support projects that contribute to employment, economic development and technological innovation, and lower the cost of corporate investment and operation.

The government supports the undertaking of foreign industrial transfers in the Central and Western regions and in the Northeastern region. The Catalog of Dominant Industries for Foreign Investment in the Central and Western Regions would be revised and the scope of foreign investment in the regions above would be expanded, with a view to encourage foreign investment. The preferential policies for enterprise income tax shall be granted to FIEs in the revised catalog in the Western regions that meet the requirements.

The government also supports using land for foreign investment projects. The preferential land supply for encouraging foreign investment industrial projects on intensive land use shall continue to be implemented and the reserve price for such use can apply at the rate of no less than 70 percent of the national minimum standard for land for industrial use.

Although the Circular is only the framework without detailed implementation rules, it shows the ambition of the government to continue opening up and attracting foreign investment. We are deeply convinced that relevant regulations would be revised and issued soon, and will update you in due course.

For More Information

If you have any questions about this Alert, please contact Lan Yu, any of the attorneys in the Duane Morris & Selvam China Practice Group or the attorney in the firm with whom you are regularly in contact.

About the China Practice

The Duane Morris China Practice Group provides Chinese companies with effective and practical solutions for doing business in Southeast Asia, Hong Kong, the United Kingdom, North America and Latin America, as well as counsel to companies with operations and transactions in China. With offices in Shanghai and Taiwan, Duane Morris and Asia-based joint-law venture Duane Morris & Selvam LLP focus on helping clients achieve investment and business goals, with an emphasis on facilitating outbound investment for Chinese corporations. Additionally, the China Practice supports foreign aspects relating to inbound investment and works with local law firms on domestic aspects of Chinese law.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.