China Approves 2024 Negative List for Foreign Investment Access

Posted by Written by Qian Zhou Reading Time: 4 minutes

China’s State Council has approved the 2024 Negative List for Foreign Investment Access. Restrictions on foreign investment in the manufacturing sector shall be completely removed, and telecommunications, education, and healthcare service sectors shall be further opened up.

On August 19, Premier Li Qiang chaired a State Council executive meeting, during which the “Special Administrative Measures for Foreign Investment Access (Negative List) (2024 Edition)” (2024 FI Negative List) was reviewed and approved. This is the first update since the previous version’s release at the end of 2021.

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Although the full text of the document has not yet been published, the State Council meeting emphasized that China will “further relax foreign investment access, completely removing restrictions on foreign investment in the manufacturing sector and accelerating the opening of the telecommunications, education, and healthcare service sectors”. This gives us some clues about how the 2024 FI Negative List will change.

Additionally, the meeting proposed that China should adapt to new circumstances by optimizing policies to attract foreign investment, promptly responding to reasonable requests from foreign investors, and introducing more practical measures to improve the business environment and enhance service guarantees.

In this article, we navigate the potential changes in the 2024 FI Negative List and its impact.

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Potential changes in the 2024 FI Negative List

Manufacturing

Over the past 10 years, China has been constantly reducing the number of measures limiting access to foreign investment. Currently, there are only two special measures for foreign investment in the manufacturing sector in the 2021 FI Negative List:

Special Measures for Foreign Investment Accessing Manufacturing Sector
1 The printing of publications shall be controlled by the Chinese party.
2 It is prohibited to invest in the application of steaming, frying, moxibustion, calcination, and other processing techniques of traditional Chinese medicine decoction pieces, as well as the production of confidential prescription products of proprietary Chinese medicines.

Consequently, “completely removing restrictions on foreign investment in the manufacturing sector” could mean that:

  • Foreign ownership cap in the printing of publications shall removed in the 2024 FI Negative List.
  • Foreign investors shall be allowed to invest in the traditional Chinese medicine production sectors.

Telecommunication

In the 2021 FI Negative List, there are two special limits for foreign investment in telecommunication companies:

  • The proportion of foreign equity in value-added telecommunications services (except for e-commerce, domestic multi-party communications, store-and-forward, and call centers) shall not exceed 50 percent.
  • Basic telecommunications services shall be controlled by the Chinese party.

Earlier in April 2024, China launched a pilot program to relax foreign ownership restrictions on certain value-added telecommunication services (VATS) in four pilot areas Beijing, Shanghai, Hainan, and Shenzhen. In the designated pilot regions, restrictions on foreign shareholding will be lifted for various VATS sectors, including Internet Data Centers (IDC), Content Delivery Networks (CDN), Internet Service Providers (ISP), online data and transaction processing, and specific types of information services. Additionally, information protection and processing services will also benefit from this relaxation.

It’s prudent to expect that at least part of the pilot relaxations on value-added telecommunication services will be reflected in the 2024 FI Negative list.

Education

In the 2021 FI Negative List, there are two special measures on foreign investment in the education sector:

 Special Measures for Foreign Investment Accessing the Education Sector
1 Preschool, general high school, and tertiary education institutions are limited to Sino-foreign cooperative education, and must be led by the Chinese party (the principal or the key administrative person-in-charge shall be a Chinese national, the number of Chinese members of the council, board of directors or joint administrative committee) shall account for at least half of the total.
2 It is prohibited to invest in compulsory education institutions and religious education institutions.

While the prohibition on investing in compulsory education institutions and religious education institutions may still exist, the foreign investment limits on preschool, general high school, and tertiary education could be relaxed to some extent.

Healthcare

In the 2021 FI Negative List, there is only one special limit for foreign investment in the healthcare sector: medical institutions are limited to Sino-foreign joint ventures.

Consequently, ‘accelerating the opening of …the healthcare service sectors’ indicates that wholly foreign-owned medical institutions might be allowed in the new 2024 FI Negative List.

Analyzing the impact of the 2024 FI Negative List

Zhong Huiyong, Associate Researcher at the China Development Institute, believes that lifting all restrictions on foreign investment in the manufacturing sector can attract advanced foreign technologies, which will actively guide the transformation and upgrading of the domestic industry. However, the increased competitive pressure from foreign investment will also drive domestic manufacturers to innovate and upgrade. Particularly with the rise of artificial intelligence, foreign investment will help the domestic manufacturing sector better integrate AI, thereby enhancing its overall capabilities.

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Nevertheless, while the relaxations in the 2024 FI Negative List are a positive step toward boosting foreign investment confidence, more substantial stimulus measures and coordinated efforts may be needed to reverse the downturn in this sector. A significant increase in domestic consumption is also eagerly anticipated.

From January to July 2024, 31,654 new foreign-invested enterprises were established nationwide, reflecting an 11.4 percent year-on-year increase. However, the actual use of foreign capital during this period totaled RMB 539.47 billion (US$ 74.2 billion), marking a significant 29.6 percent year-on-year decline.

By industry, the actual use of foreign capital in the manufacturing sector reached RMB 154.48 billion (US$ 21.2 billion), representing 28.6 percent of the national total and a 2.9 percentage point increase from the same period last year. In high-tech manufacturing, foreign capital usage was RMB 69.58 billion (US$ 9.6 billion), accounting for 12.9 percent of the national total, up by 2.6 percentage points year-on-year. Notably, the sectors of medical equipment and instrumentation manufacturing, professional technical services, and computer and office equipment manufacturing saw increases in foreign capital usage of 87 percent, 41.3 percent, and 32.4 percent, respectively.

By source, actual investment from Germany and Singapore in China increased by 26.4 percent and 11 percent, respectively.

The China Briefing Team is closely monitoring developments in foreign investment. Stay updated by signing up for our weekly newsletter.

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