On 4 November 2014, China's National Development and Reform Commission (the "NDRC") released an "opinion-seeking draft" of proposed changes to the Catalogue of Industries for Guiding Foreign Investment (the "Foreign Investment Catalogue"), which is China's guide to foreign investment, classifying projects into any of the three encouraged, restricted and prohibited categories.
The proposed changes will be implemented on 3 December 2014 (subject to any further modifications as a result of the ongoing public consultation).
Under the revised Foreign Investment Catalogue, the number of restricted sectors will be significantly reduced, from 79 to 35. Wholly owned foreign-invested enterprises (WFOEs) will be allowed in various industries that before only accepted Sino-foreign joint ventures, such as oil exploitation, automobile parts, accounting and auditing, and aircraft and vessel engines and components. Furthermore, foreign investors will benefit from relaxed restrictions on the percentage of shareholder equity that must be controlled by the Chinese partners to joint ventures across a number of industries, including international sea transportation, aircraft manufacturing, and the design and manufacture of civil satellites. For a full overview of the changes, please see MOFCOM's overview of the differences between the current new draft and the version of the Foreign Investment Catalogue which is currently in force, here.
This draft, and the call for public commentary, follow earlier statements by LI Keqiang (announced in the margin of the Executive Meeting of the State Council on 8 October 2014) that China will abolish the approval requirement for outbound investment, subject to only a few exceptions. This will require a revision of the Catalogue of Investment Projects Subject to Governmental Verifications 2013 (the "Governmental Verifications Catalogue") and is expected to a significant lowering of the approval requirements for outbound investment projects.
Together, both proposed amendments underscore China's ambition to further facilitate both inbound and outbound investments and thereby to further integrate China's economy into the world.
