What foreigners can't do in free trade zone

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What foreigners can't do in free trade zone

By Ye Zhen (Shanghai Daily) 09:15, October 01, 2013

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China released a negative list for foreign investment in its newly-opened free trade zone in Shanghai yesterday, allowing overseas participants to invest as freely as their domestic peers in business fields beyond the list.

The list, covering 18 sectors ranging from agriculture to manufacturing to finance to public services, specifies all the business areas in which restrictions will remain for foreign enterprises in the zone.

Foreign investment in banking, finance companies and trust firms will remain subject to related restrictions, according to the list. Foreign ownership in joint-venture securities firms and fund management companies is limited to no more than 49 percent and in insurers to no more than 50 percent.

Foreign investment in research and development and manufacturing of automobile electronic devices can only be made through joint ventures. The proportion of foreign investment in production of batteries for new energy vehicles is up to 50 percent.

Foreign investors are forbidden from having a share in news agencies, publishing companies, radio and film producing companies and online gaming firms. Foreign participation is barred from Internet bars, the gambling industry and pornography, according to the list.

Investment in high-end properties such as hotels, office buildings, exhibition centers and villas, as well as large-scale wholesale market for agriculture products also falls into the off-limits category.

Foreign companies can carry out businesses in any sectors that are not included in the list and this offers more leeway for foreign participants, Dai Haibo, deputy director of the zone administrative committee, said.

Business types included in the list account for 17.8 percent of all the 1,069 detailed sectors in the national economy, he said.

The list is a temporary version for 2013 and the zone regulators will update the list every one or two years to better facilitate liberalization policies testing in the free trade zone.

Tu Xinquan, vice director of the China Institute for WTO Studies of University of International Business and Economics, said the introduction of negative list was a major reform to the approval system with the list setting a border between the government and the market.

A registration system has been introduced for setting up an operation in areas not on the list, replacing the former approval system. It will simplify procedures and reduce processing time from 29 days to four.

Kong Linglong, head of the National Development and Reform Commission's department of foreign capital and overseas investment, said the registration system would also apply to Chinese enterprises in the zone seeking outbound investment.

"This will definitely enhance the convenience of overseas investment and enhance Chinese firms' ability to internationalize their operation," Kong said.

The measure is deemed as one of the priorities among major reforms in the zone as China is trying to cut the power of bureaucrats and reduce government intervention to empower private enterprises to play a bigger role in its economy.