62 “Notice of the State Council on putting in order tax incentive policies”, issued in November 2014, required the State Council to sign off new incentives and requires all provincial governments to ensure that all reliefs inconsistent with national law are abolished. The goal of all of China’s FTZs is to provide a trial ground for trade and investment liberalization measures and to introduce service sector reforms, especially in financial services, that China expects to eventually introduce in other parts of the domestic economy. Nationwide foreign investment negative list: 2017 Foreign Investment Industrial Guidance Catalogue. New prohibitions on certain industrial sectors have also been included in the new Catalogue. Pre-approvals are still necessary for investments in Negative List sectors. China’s SPC recorded over 19,000 liquidation and bankruptcy cases in 2019, double the number of cases in 2017. China introduced formal bankruptcy laws in 2007, under the Enterprise Bankruptcy Law, which applied to all companies incorporated under Chinese laws and subject to Chinese regulations. The two countries concluded a “Phase One” trade agreement on January 15, 2020. Chinese law requires fair compensation for an expropriated foreign investment, but does not detail the method used to calculate the value of the foreign investment. All rights reserved. As a result, MOFCOM in 2016 launched the RBC Platform, which serves as the national contact point on RBC issues and supplies information to companies about RBC best practices in China. However, with this new development, local governments now are again allowed to offer incentives to attract foreign investment as set out in the 20 measures. The Arbitration Law embraced many of the fundamental principles of the United Nations Commission on International Trade Law’s Model Law on International Commercial Arbitration. However, the vast majority of bank credit is disbursed to state-owned firms, largely due to distortions in China’s banking sector that have incentivized lending to state-affiliated entities over their private sector counterparts. Notable changes included openings in the oil and gas sector, telecommunications, and shipping of marine products. China now has more than 90 U.S.-style specialized bankruptcy courts. China relies on the Special Administrative Measures for Foreign Investment Access (known as the "nationwide negative list") to categorize market access restrictions for foreign investors in defined economic sectors. Treasury removed this designation in January 2020. Ineffective enforcement of Chinese laws and regulations remains a significant obstacle for foreign investors trying to protect their IP, and counterfeit and pirated goods manufactured in China continue to pose a challenge. In the first step, in October 2016, MOFCOM issued Interim Measures for Filing Administration of Establishment & Alteration of FIEs (“Interim measures”) providing for the nationwide rollout, from October 2016, of the Negative List approach for FIE establishment and alteration (e.g. Two “negative lists” identify the industries and economic sectors from which foreign investment is restricted or prohibited based on location, and the third list identifies sectors in which foreign investments are encouraged. China’s “Big Five” – Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, and Industrial and Commercial Bank of China – dominate the sector and are largely stable, but over the past year, China has experienced regional pockets of banking stress, especially among smaller lenders. Please take a moment to review these changes. China’s Securities Law defines debtor and guarantor rights, including rights to mortgage certain types of property and other tangible assets, including long-term leases. Special Administrative Measures (Negative List) for Foreign Investment Access (Edition 2020) Compared with the current version, the new list has 127 more items, a rise of . Foreign companies still complain about continued challenges when setting up a business relative to their Chinese competitors. Local government-led negotiations resolved most corporate debt disputes, using asset liquidation as the main insolvency procedure. Investment Administration: (1) The FIL (Articles 4 and 28) works together with the Negative List in setting forth the areas where foreign investment is prohibited or restricted; thus, foreign investors proposing to invest in China should comply with the restrictive requirements regarding equity ratios (some of which will be phased out in the . Moreover, the emergence of the Coronavirus (COVID-19) pandemic in Wuhan, China in December 2019, will place further strain on China’s economic growth and global supply chains. New China negative list for foreign investment... Industries where foreign investment is ‘encouraged’; Industries where foreign investment is ‘restricted’; Industries where foreign investment is ‘prohibited’. Some U.S. businesses report that local officials and regulators sometimes only accept investments with “voluntary” performance requirements or technology transfer that help develop certain domestic industries and support the local job market. One of the 20 measures set out by the State Council in January 2017 was to allow local governments to develop preferential policies to support foreign-invested projects that can facilitate employment, economic development and technology innovation in their localities. Found inside – Page 96... as a result of the unilateral reform, China has adopted a negative list approach to regulating foreign investment which significantly simplifies and ... A negative list for cross-border trade in services in South China's Hainan Province, which is also China's first negative list for the services trade, started to take effect on Thursday. Banks will then check if the repayment volume is within the repayable principal. China also unveiled its 2020 negative list for foreign investment in pilot free trade zones, cutting the number of prohibited industries to 30 from 37. The FTZ Negative List . On June 30, 2019, the National Development and Reform Commission (NDRC) and Ministry of Commerce (MOFCOM) jointly announced the release of China’s three “lists” to guide FDI. China seeks to support inbound FDI through the “Invest in China” website, where MOFCOM publishes laws, statistics, and other relevant information about investing in China. The policy is to continue encouraging foreign investment in high-end manufacturing, high technology, energy conservation and environmental protection, and modern services. Found inside – Page 92Pages/China-advances-foreign-investment-negative-list-reform-seventh-draft-catalogue. aspx. Accessed 15 May 2020 Linklaters LLP (2016b) Incremental reform ... The layout of the Catalogue has been realigned to confirm with the new “negative list” system. China now has 11 FTZs, including Shanghai, Guangdong, Tianjin, Fujian, Liaoning, Zhejiang, Henan, Hubei, Chongqing, Sichuan and Shaanxi; the latter seven were approved for set up in March 2017. While the guidelines restricted Chinese outbound investment in sectors like property, hotels, cinemas, entertainment, and sports teams, they encouraged outbound investment in sectors that supported Chinese industrial policy by acquiring advanced manufacturing and high-tech assets. In December 2019, the Coronavirus (COVID-19) pandemic emerged in Wuhan, China. (See KPMG China Tax Weekly Update (Issue 39, October 2016) for details.). Recently, Xi and other senior leaders have increasingly focused reform efforts on strengthening the role of the state as an investor or owner of capital, instead of the old SOE model in which the state was more directly involved in managing operations. technologies will curtail sales opportunities for foreign firms or pressure foreign companies to disclose source code and other proprietary intellectual property. The PBOC has traditionally deployed various policy tools, such as open market operations, reserve requirement ratios, benchmark rates and medium-term lending facilities, to control credit growth. Chinese state-run funds do not report the percentage of their assets that are invested domestically. This monograph answers a central research question of how domestic law should be formulated to adequately protect national security of the host state whilst posing minimum negative impacts to the free flow of cross-border investment. The issuance of this document follows on from an executive meeting of the State Council on 28 December 2016, chaired by Premier Li Keqiang, which approved new guidelines to further attract foreign investment. ALSO READ: Negative list makes debut in FTA talks. The nation's actual use of foreign investment grew 35.4 percent year-on-year to reach 481 billion yuan ($74.78 billion) in the first five months of this year, and had increased by 30.3 percent from the same period in 2019, according to the Ministry of Commerce. In the first half of 2010 Chinese direct outbound investments hit US$23 billion, with seven deals over US$ 1 billion. In fact, China's outbound investments are a hot topic around the globe. This was partly due to regulatory reforms that helped streamline some business processes, including improvements to addressing delays in construction permits and resolving insolvency. The All China Federation of Trade Unions (ACFTU) is the only union recognized under the law. In 2013, the State Council announced the Shanghai pilot FTZ to provide open and high-standard trade and investment services to foreign companies. Found insideSince 2016, China's outbound foreign direct investment patterns to the US and the ... Measures (Negative List) for the Admission of Foreign Investment (the ... PRC officials have indicated China intends to utilize OECD guidelines to improve the professionalism and independence of SOEs, including relying on Boards of Directors that are independent from political influence. However, courts routinely rejected applications from struggling businesses and their creditors due to the lack of implementation guidelines and concerns over social unrest. For remittance of interest and principal on private foreign debt, firms must submit an application form, a foreign debt agreement, and the notice on repayment of the principal and interest. The assessment deemed 420 firms, all rural financial institutions, “extremely risky.” The official rate of non-performing loans among China’s banks is relatively low: below two percent as of the end of 2019. On June 30, 2020, China announced the Foreign Investment Negative List 2020 (hereinafter referred to as the "Negative List for Foreign Investment Access").Comparing with Edition 2019, the items in the Edition 2020 are reduced from 40 to 33 items, with a reduction ratio of 17.5%. Negative list is a management model of foreign investment established in China and legalized by the Foreign Investment Law of the People's Republic of China, which comes into effect on January 1, 2020.It refers to special administrative measures for the access of foreign investment in certain industries or areas. The PBOC had previously also set quotas on how much banks could lend, but abandoned the practice in 1998. China relies on the Special Administrative Measures for Foreign Investment Access (known as the "nationwide negative list") to categorize market access restrictions for foreign investors in defined economic sectors. China will pick up pace in formulating and introducing the 2021 version of negative list for foreign investment and continuously expand its opening-up, in a bid to facilitate high-quality development through higher-level opening-up, said an official with the Ministry of Commerce of China (MOFCOM) at a press conference held by the State Council Information . Found inside – Page 162020, the FIL reshapes China's foreign investment legal regime and adopts a “pre-entry national treatment plus negative list” mechanism to replace the ... This ranking does not account for major challenges U.S. businesses face in China like IPR violations and forced technology transfer. Government agencies often do not make available for public comment and proceed to publish “normative documents” (opinions, circulars, notices, etc.) China has approximately 150,000 wholly-owned SOEs, of which 50,000 are owned by the central government, and the remainder by local or provincial governments. These are cut to 63 in the new Catalogue. Meng Wei, a spokeswoman for the National Development and Reform Commission, said the country is speeding up the formulation of the negative list for 2021, which will promote opening-up in the service sector in a bid to foster high-quality economic development. The term negative list is used to define industries in which foreign companies cannot invest and specifies restrictions or bans on certain types of foreign investment. Relax restrictions for services, manufacturing and mining investment. Also prohibited in the new Catalogue are provision of radio and TV video on demand services, installation services for satellite TV broadcast receiving facilities, and broadcasting to China of radio and television programs. The 2019 foreign investment negative lists made minor modifications to some industries, reducing the number of restrictions and prohibitions from 48 to 40 in the nationwide negative list, and from 45 to 37 in China's pilot FTZs. Since the CCP 19th Party Congress in 2017, CCP leadership has underscored Chairman Xi Jinping’s leadership and expanded the role of the party in all facets of Chinese life: cultural, social, military, and economic. There had been, in 2014, an effort to limit local authorities’ discretions in creating tax incentives and to “cleanse” existing reliefs, which were not consistent with national tax law. The new Catalogue is to replace the existing Catalogue issued in 2015 (“2015 Catalogue”). It also makes China the No 1 destination for investment by many multinationals.". The latter rule provides that news agencies shall obtain an internet-based news information service license from the CAC before offering internet-based news information collecting, editing and publishing services. 03 / Select Countries You can add more than one country or area. This means that investments by foreign entities are treated the The new negative lists will go into effect on July 23. However, investors have complained that in practice, investing in an industry not on the negative list does not guarantee a foreign investor “national treatment,” or treatment no less favorable than treatment accorded to a similarly-situated domestic investor. To invest in the non-prohibited industry as listed in the Negative List, permission for foreign investment access shall be granted. If formal mediation is necessary, Chinese parties and the authorities typically prefer arbitration to litigation. 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