China Released Draft Encouraged Catalogue to Boost Foreign Investment

On December 20, 2024, China’s National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) released the Catalogue of Encouraged Industries for Foreign Investment (Exposure Draft) (hereafter the “Draft FI Encouraged Catalogue”), revising the 2022 version. This draft is open for public feedback until January 20, 2025.

Similar to the previous version, the Draft FI Encouraged Catalogue includes two sub-catalogues – one covers the entire country (“national catalogue”) and one covers the central, western, and northeastern regions (“regional catalogue”).

Together, the FI encouraged catalogue identifies industries where foreign direct investment (FDI) will be welcome and treated with favorable policies in China.

The newly released 2024 Draft FI Encouraged Catalogue contains a total of 1,700 items (620 in the national catalogue and 1,080 in the regional catalogue), increased by 15 percent from 1,474 items (519 in the national catalogue and 955 in the regional catalogue) in the 2022 version.

The lengthening of the catalogue demonstrates China’s firm standing on economic opening-up and the fact that more investment fields will favor foreign investors.

Key changes in the 2024 Draft FI Encouraged Catalogue

Overall, the revision of the 2024 Draft Foreign Investment (FI) Encouraged Catalogue focuses on:

• High-performance equipment manufacturing
• Energy-saving, environmental protection, and low-carbon upgrades in manufacturing
• Automation and intelligence in equipment and processes
• Research, development, production, and manufacturing of equipment related to new energy utilization
• Development of emerging technologies, such as EVOL and generative AI
• Healthcare and education opening up

In specific sectors, the new Encouraged Catalogue introduces or refines incentives for areas like medical devices, batteries, new energy vehicles, pet care, elderly care, and cultural tourism, which are worth noting.

What are the favorable policies to facilitate FDI in encouraged industries?

So far, the following favorable treatment is in place for foreign-invested enterprises (FIEs) engaged in doing business in the listed industries published in the encouraged catalogue:

• Tariff exemptions on imported equipment – for encouraged foreign-invested projects, the import of self-use equipment within the total amount of investment can be exempted from customs duties, excepted for those listed in the Catalogue of Major Technical Equipment and Products Not Exempt from Import Duty and Catalogue of Imported Commodities Not Exempt from Import Duty for Foreign Investment.
• Access to preferential land prices and looser regulation of land use – land can be preferentially supplied for encouraged foreign-funded projects with intensive land use. The land transfer reserve price can be determined at 70 percent of the national minimum price for the transfer of industrial land.
• Lowered corporate income tax (CIT) – for FIEs in encouraged industries in the western regions and Hainan province that meet the requirements, the CIT rate can be reduced to 15 percent.

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