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China announced draft 2020 Catalogue of Encouraged Industries for Foreign Investment

According to the annual study “Doing Business” released by the World Bank Group in recent years, China’s business environment has improved greatly during 2018 to 2020, with its global ranking moved up from 78th to 31st.

In terms of investment policies, the Chinese government mainly uses the Catalogue of Encouraged Industries for Foreign Investment to facilitate and guide foreign investment in specific industries, fields, and regions in China. On the basis of the current 2019 Catalogue of Encouraged Industries for Foreign Investment (Catalogue 2019), the Chinese government announced that it would continue to expand the scope of encouraged industry sectors. Against such background, the Catalogue of Encouraged Industries for Foreign Investment (2020 version) (Draft for Comments) (Draft 2020) was announced on 31 July 2020.

Upon comparison, it can be noted that Draft 2020 maintains the same structure as Catalogue 2019 by combining the “National Catalogue of Encouraged Industries for Foreign Investment” and the “Catalogue of Advantageous Industries for Foreign Investment in the Central and Western Regions” together. In so far as amendments are concerned, Draft 2020 contains 125 newly added items, and 76 revised items which were amended by expanding the scope of the original items, etc.

Overall, the revised parts of Draft 2020 encourage foreign investors to:

(1) participate in the high-quality development of the manufacturing industries. For example, adding items such as the manufacturing of noise and vibration pollution control equipment, the manufacturing of artificial intelligence-assisted medical equipment, the R&D and manufacturing of passenger ship navigation and communication system, and the manufacturing of laser projection equipment, which are applicable nationwide; 
(2)invest in the production service industry. For example, adding items such as the maintenance and repair of modern high-end equipment, the transformation and integration of digital production line, and the R&D and application of the blockchain technology, which are applicable nationwide; and
(3) further invest in the central and western regions of China. For example, for Henan Province, adding items such as the production, R&D, and testing of hydraulic pipes, and for Ningxia Autonomous Region, adding items such as the development and production of intelligent robot equipment.

Draft 2020 indicates China’s efforts to stabilise foreign investment in the face of COVID-19. Upon the coming into effect of the final version, it is expected that foreign investors in more business sectors will enjoy preferential policies in China.

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