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China formally implements unified negative list regime for market access

In 2015, China’s State Council proposed that it would establish a unified negative list regime for market access[1]. It also clarified that such a list regime would include a market access negative list (Market Access Negative List) equally applicable to foreign and domestic investors, as well as the foreign investment negative list (Foreign Investment Negative List) that applies exclusively to foreign investors[2]. The latest version of the Foreign Investment Negative List came into force in July 2018.

On 25 December 2018, the National Development and Reform Commission and the Ministry of Commerce jointly promulgated, effective from the date of issuance, the Market Access Negative List (version 2018) (List (2018)). Thus, China’s market access has entered a unified nationwide negative list era.

The List (2018), in essence, is not a set of newly made rules, but mainly the carding and consolidation of existing rules. Its contents primarily include a catalogue of prohibited industries and a catalogue of approval-based industries. In respect of the prohibited industries, it:

(1)    consolidates the relevant prohibitive provisions in connection with market access, which are established by PRC laws, regulations and State Council’s decisions etc.;

(2)    clarifies those products, technologies, processes, equipment, and activities, which are eliminated or restricted due to national industrial policies (note: the List (2018) has incorporated catalogues of “Eliminated projects” and “Restricted projects”, with minor changes, which are part of the Catalogue for Guidance on Industrial Restructuring (2011 version) (further revised in 2013))

(3)    focuses on the current risk control priorities, namely the financial and Internet sectors, and provides specifically those business activities that are prohibited.

In respect of the approval-based industries, the List (2018) sets forth the approval measures which are applicable nationwide, as well as a few measures that are applicable to specific regions[3] only (note: the List (2018) has incorporated the Catalogue of Investment Projects Subject to Government Approval (2016 version)).

To deal with potential economic performance risks, the List (2018)stipulates also that the government reserves the right to initiate market access restriction under special circumstances[4].

It appears that the List (2018) and other related regulations to be promulgated in the near future are intended to achieve the effect of “full access unless otherwise prohibited”, whereby market players can easily recognise the relevant market access at a glance, as to which industries require the government’s examination and approval, and which industries can be entered into at the player’s own independent decision. The Chinese government states that it will perfect the “three mechanisms” (i.e., establishing a negative list information disclosure mechanism, establishing a negative list dynamic adjustment mechanism, and perfecting the connecting mechanism among administrative approval procedures) as a next step, so as to complete the implementation of the negative list regime.

[1] Opinions of the State Council on Implementing “Negative List” System for Market Access (promulgated in 2015) provides that the negative list for market access system means a series of arrangements regarding the industries, fields, and businesses etc., explicitly listed by the State Council, which are prohibited or restricted from investment and operation within China; and the corresponding management measures carried out accordingly by governments at all levels. All other industries with market access outside the negative list shall have equal market access to those industries, fields, and businesses etc. outside the “negative list” according to law.

[2] It is worth noting that, as the Market Access Negative List also applies to foreign investors, when choosing investment projects, foreign investors should check both the Foreign Investment Negative Lists and the Market Access Negative List, and pay attention to the detailed implementation rules prescribed by local governments.

[3] The List (2018) sets out a “Regional approval measures” sub-category, which incorporates regional market-entry administrative measures adopted by provincial level governments through relevant legislative procedures, in order to take into account regional differences and to improve the list’s completeness.

[4] The List (2018) stipulates that in case temporary access administrative measures are required due to special reasons, such measures can, upon State Council’s approval, be included into the list with immediate effect.

Related Services and Sectors:

China Trade & Investment, Corporate and M&A

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