September 2014
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C
HINA
B
RIEFING
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5
Revised Negative List
Of all the subsequent reforms introduced in the FTZ since its opening, by far the most anticipated and potentially furthest reaching has
been the Revised Negative List unveiled on June 30 of this year. To recap, the Negative List is an innovative approach to foreign investment
adopted exclusively in the Shanghai FTZ, under which foreign investors enjoy equal treatment as Chinese domestic enterprises in any
industry not explicitly restricted or prohibited on the List. As such, it is the cornerstone of the FTZ’s broader package of economic reforms.
The Revised Negative List lowered the number of industries restricted for foreign investment by 27 percent to 139 from a previous total
of 190. The majority of these changes were concentrated in the categories of Manufacturing and Transportation, Warehousing, and Postal
Services, and to a lesser extent Wholesale & Retail. Additionally, the Revised Negative List clarified many of the restrictions stipulated by
the original Negative List on investment in specific industries, for example, mandatory Sino-foreign investment ratios.
The most significant changes were made to the financial industry, whereby foreign investment is now freely permitted into investment
banks, financial companies, trust companies, and currency brokerage companies. As mentioned above, for foreign investment into China’s
booming healthcare industry, restrictions were removed on theminimum investment (previously RMB 20million) andmaximumoperation
period (20 years) of medical institutions. Lastly, foreign investment is now freely permitted into cybercafés in China—unfortunately at a
time in which their importance is eroding against widespread mobile internet use.
Other highlights included relaxed restrictions on the manufacturing of printing inks, pigments and similar products; certain previously
restricted chemicals and vitamins; synthetic fibers; construction cranes; and electronic automobile components; as well as liberalization
of the railway freight; international maritime transportation; cargo and container handling; and aircraft repair industries.
An initial wave of surprise spread out among industry observers to see the gambling and pornography industries removed from the Revised
List. Later, however, it was confirmed that despite their apparent liberalization, these industries remain barred to foreign investment by
virtue of their illegality under Chinese law.
Investors registered in Hong Kong and Macau were given special priority by the revised list, for example, via freer investment into the
construction and operation of movie theaters, as well as a wide range of aviation transport ground-based services. This opens the possibility
of foreign investment channeled through Hong Kong into these industries.
Industry Category
Specific Industry
Revised Terms
[C] Manufacturing
C153 Green tea production and processing
JVs newly permitted with Chinese equity controlling
partner
C343 Wheeled or crawler crane manufacturing Removed from Revised List
C373 Luxury ocean liner design
Removed from Revised List
[J] Financial services
J66 Investment banks, financial companies,
trust companies, and currency brokerage
companies
Removed from Revised List
[Q] Health and social activities
Q83 Medical institutions
Restrictions removed on total investment and
operations period.
[R] Culture, sports,
and entertainment
R861 Movie theater construction and operation
Restrictions removed for investment from Hong Kong
and Macau. Otherwise restricted to JV with Chinese
equity controlling partner.
R891 Cybercafés (places for the provision of
internet service)
Removed from Revised List
