China Deepens Service Sector Reform with New Pilot Program Expansion 

A new Work Plan outlines 155 tasks to expand access to China’s services industry in pilot areas. These pilot tasks include allowing foreign companies to provide telecom services such as app store and internet access services without foreign shareholding caps, allowing foreign medical professionals to open clinics and engage in short-term practice, and allowing foreign travel agents to provide outbound travel services to Chinese citizens. The Work Plan is the latest effort of the Chinese government to ease foreign investment access in the China services sector, the country’s fastest-growing industry segment.  

On April 18, 2025, China’s Ministry of Commerce (MOFCOM) released the Work Plan for Accelerating the Comprehensive Pilot Program for Expanding the Opening-up of the Service Industry (“Work Plan”), marking a significant new phase in the country’s ongoing efforts to liberalize its service sector and attract more foreign investment. Building on a decade of pilot programs initiated in 2015, the new plan expands the number of pilot cities and introduces 155 pilot tasks across 14 focus areas, including specific liberalization pilot programs in sectors such as telecommunications, finance, healthcare, and tourism. 

These initiatives reflect China’s broader strategy of cautious, phased reforms, starting with limited pilot programs in certain areas that, if successful, are rolled out to more regions. The Work Plan also serves to outline the country’s ambitions to expand market access, facilitate participation of foreign companies in China’s industries, and to align more closely with high-standard international economic and trade norms. 

Background: China’s service sector pilot programs

Since the first batch of pilot cities was approved in 2015, China has steadily pushed to open its service sector, traditionally one of the most tightly regulated parts of the economy. To date, 11 regions (Beijing, Tianjin, Hainan Province, Chongqing, Shenyang, Nanjing, Hangzhou, Wuhan, Guangzhou, and Chengdu) have participated in three batches of “pilot tasks”. These efforts have collectively introduced over 1,300 pilot tasks, targeting critical industries such as telecommunications, finance, culture, and education.

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According to MOFCOM, these pilot zones absorbed RMB 293.2 billion (US$40.2 billion) in foreign direct investment (FDI) in 2024, approximately half of the country’s total FDI in the service industry. These pilot zones have offered a stable policy environment, improved institutional transparency, and a rich array of business application scenarios for foreign companies operating in China. 

The pilot programs have also achieved tangible progress in several key sectors. In the healthcare services sector, the pilot zones have introduced a series of measures to encourage the development of foreign-invested medical institutions and the recruitment of overseas medical professionals. As a result, there are now more than 150 joint-venture or wholly foreign-owned medical institutions operating in China, and over 1,500 foreign medical personnel have engaged in short-term medical practice within the country. 

In the telecommunications sector, pilot reforms have supported the gradual opening of value-added telecom services to foreign investment. Specifically, in four key areas， including Beijing’s Comprehensive Demonstration Zone for Expanding the Opening-up of the Service Industry, foreign equity caps in several categories of value-added telecom services have been lifted. On February 28, 2025, the Ministry of Industry and Information Technology (MIIT) granted pilot approvals to 13 globally recognized enterprises, including Deutsche Telekom and Siemens, to participate in these programs.

Pilot area expansion and key industry tasks 

The 2025 Work Plan expands the program’s geographic scope by adding nine new cities: Dalian, Ningbo, Xiamen, Qingdao, Shenzhen, Hefei, Fuzhou, Xi’an, and Suzhou. These new pilot areas join the regions (Beijing, Tianjin, Hainan Province, Chongqing, Shenyang, Nanjing, Hangzhou, Wuhan, Guangzhou, and Chengdu) in testing reforms before broader application. This reflects China’s intent to decentralize development, reduce the regional economic gap, and create diverse ecosystems for foreign business operations across the country. 

The Work Plan lays out 155 pilot tasks aimed at easing market access, promoting international cooperation, fostering innovation, and aligning domestic practices with global norms. These tasks span 14 different areas, including specific tasks for improving access to the fields of telecommunications, healthcare, finance, trade, culture, tourism, and logistics. 

Telecommunications 

Among the 155 pilot tasks, one of the most significant is the pilot program that proposes canceling the restrictions on foreign equity ratios for internet and app store service providers. 

Under China’s Special Administrative Measures for Foreign Investment Access (Negative List) (2024 Edition), foreign companies providing value-added telecom services are currently limited to a 50 percent equity ratio. The Work Plan proposes “studying and implementing support for further opening up of value-added telecommunications services,” suggesting that China may seek to further ease restrictions on foreign investment in this space. 

The Work Plan also proposes allowing foreign companies to open up domestic virtual private network (VPN) services to foreign investment (with a foreign equity cap of 50 percent), and attracting overseas telecom operators to set up joint ventures to provide domestic VPN services to local foreign-invested enterprises (FIEs) in relevant provinces. 

Additional pilot tasks in the telecom and digital sectors include: 

• Canceling foreign equity caps for internet access services (specifically for services that provide internet access to individual users), allowing greater foreign participation in this segment of value-added telecom
• In Shanghai, supporting the development of the Lingang Data Industrial Park and exploring the creation of a “regulatory sandbox” model to pilot cross-border digital services and international digital economy cooperation.
• Encouraging the development of local data labeling industries, which support AI and machine learning ecosystems.
• Improving the data trading market system, contributing to the formalization and commercialization of data as a productive asset.
• Promoting the export of home-grown games, including the expansion of application scenarios and the full industrial chain from IP creation to game development, publishing, and overseas operations.

Together, these reforms signal a targeted effort to open up the telecom and digital economy sectors while maintaining a controlled and strategic approach through localized pilot testing. 

Further opening of healthcare, finance, and tourism 

The healthcare sector features prominently in the new pilot programs. Proposals include allowing foreign doctors and professionals from Hong Kong, Macao, and Taiwan to establish clinics on the mainland, streamlining licensing processes for short-term practice, and open foreign-invested nursing schools. The plan also supports the creation of gene and cell therapy patent databases and the establishment of non-profit medical institutions through donations. 

In finance, reforms aim to: 

• Deepen the pilot of Qualified Foreign Limited Partners (QFLP), a program allowing foreign investors to participate in China’s private equity market.
• Support multinational companies in centralized cross-border capital operations in RMB.
• Attract global institutional investors such as sovereign funds and ESG-focused funds to participate in green and sustainable projects.

The tourism sector is also seeing liberalization. Foreign-invested travel agencies will now be allowed to operate outbound tourism services for Chinese citizens, excluding travel to Taiwan. In regions like Tianjin, pilot programs will support bonded display and custody of classic cars, while Hainan will trial special imports of medical and health foods under its Boao Lecheng International Medical Tourism Pilot Zone. 

Promoting two-industry integration and modern services 

The Work Plan includes initiatives to integrate advanced manufacturing with modern services, a development model known as “两业融合” (integration of two industries). This includes encouraging logistics-tech synergies, financial services for industrial upgrading, and smart manufacturing systems powered by digital platforms. 

New intermodal transport models and container shipping partnerships are encouraged to strengthen exports of electric vehicles and power batteries, two fast-growing Chinese export sectors. 

Enabling foreign talent and enhancing legal frameworks 

The Work Plan introduces a range of pilot tasks aimed at attracting and supporting foreign professionals, particularly senior executives and technical staff at FIEs. These measures focus on improving visa access, streamlining work authorization, and strengthening legal safeguards. 

Key initiatives to support foreign talent include: 

• Supporting regional coordination on transit visa exemption policies, allowing visa-free travelers to move across provinces within designated linked zones.
• Allowing senior executives of foreign firms planning to set up subsidiaries or branches in pilot zones to apply for business visas valid for up to two years.
• Simplifying work permit applications for executives of FIEs that have invested in and registered legal entities within the pilot zones.
• Ensuring that accompanying spouses and dependents enjoy the same entry and temporary stay terms as the principal visa holders.
• Implementing electronic port visas across all of Shanghai, with plans for gradual national expansion.
• Promoting the wider social and commercial use of foreign permanent residence ID cards, expanding their recognition across sectors such as housing, finance, and transportation. 

In addition to the talent measures, the Work Plan outlines steps to strengthen institutional guarantees for foreign businesses operating in China. This includes promoting international arbitration, cross-border legal cooperation, and the orderly expansion of foreign-related legal practices such as international dispute resolution, labor rights enforcement, and legal services tied to foreign investment. Supervision and enforcement mechanisms around labor and social security laws will also be enhanced to create a more predictable and rule-based business environment. 

Improving standardization of regulations 

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The Work Plan outlines critical steps to improve the standardization of regulations, particularly in areas that require enhanced coordination between domestic and international frameworks. One of the primary objectives is to promote the intercommunication and compatibility of regulations in several high-impact sectors, such as cross-border data flow, intellectual property rights, and commercial encryption. By aligning domestic and foreign management regulations in fields like carbon emissions, digital identity, electronic invoicing, and cross-border cargo transport, the Work Plan seeks to create a more cohesive regulatory environment. This alignment not only facilitates smoother international trade but also supports the creation of common standards, reducing barriers to global business operations. 

A crucial aspect of this regulatory alignment is the establishment of negative lists for cross-border data transfers. These lists will specify which categories of data in specific field are subject to export restrictions, thereby allowing companies based in Free Trade Zones (FTZs) to freely export any data not included in the lists. 

Since March 2024, China has been encouraging its FTZs to take the lead in implementing these negative lists. Zones like Beijing, Tianjin, Shanghai, Zhejiang, and the Hainan Free Trade Port (FTP) have been the first to establish their own data export management systems.  

Specific tasks related to data export outlined in the Work Plan include: 

• Accelerating the establishment of the Hainan Free Trade Port’s data exit management list (negative list), prioritizing key sectors such as trade, finance, deep-sea exploration, aerospace, medical devices, culture, education, tourism, and intellectual property, to ensure secure and orderly cross-border data flow.
• Supporting the designation of data export management lists within FTZ under the national data classification and protection framework.
• Developing guidelines and catalogs for industry-specific data, such as biological and genetic data, to establish clear identification standards for important data and explore mechanisms for secure cross-border data flow and data product intellectual property protection. 

Alignment with CPTPP and DEPA standards 

The Work Plan also emphasizes aligning with high-standard international trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership Agreement (DEPA). Specifically, the Work Plan calls for: 

• Actively aligning with the CPTPP regulations in fields such as IIP protection, environmental standards, labor protection, government purchasing, e-commerce and finance; and
• Trialing relevant conditions of the DEPA. 

China officially applied to join both in 2021, and these pilot programs could help demonstrate readiness in critical areas like intellectual property protection, labor standards, environmental sustainability, and e-commerce. 

However, major hurdles remain, particularly regarding state-owned enterprise (SOE) reform and data policy. CPTPP disciplines SOE behavior in competitive markets and places limits on government subsidies, areas where China faces significant challenges. Meanwhile, DEPA requires members to allow free cross-border data flows and forbids mandatory local data storage, requirements that conflict with current Chinese laws like the Cybersecurity Law and Personal Information Protection Law (PIPL). 

Nevertheless, China has made significant strides in improving its business environment, such as regularly shortening the negative list for foreign investment, enhancing IP protection, and opening up the financial sector. These pilot programs could serve to demonstrate China’s commitment to meaningful reform and help build international confidence and support for its accession to these treaties. 

Conclusion: A measured, strategic opening 

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The Work Plan for expanding the opening-up of China’s service industry reflects the country’s continued commitment to enhancing market access and improving the business environment for foreign companies. Through measures such as expanding telecom industry access, facilitating data export from FTZs, and introducing new visa schemes, China is addressing some of the key concerns of foreign businesses operating within its borders. These initiatives are particularly significant, as they facilitate greater participation in sectors critical for global businesses, such as telecommunications, finance, and healthcare. 

However, the rollout of these reforms to additional regions will be gradual. The Chinese government is keen to ensure that these policies work as intended before they are implemented on a wider scale. This cautious approach highlights China’s strategy of phased, localized testing, with broader national implementation dependent on the outcomes of pilot programs. Ultimately, while the pace may be slow, these reforms signal a meaningful step toward a more open and transparent business environment that aligns more closely with global standards, fostering greater confidence among foreign investors in the long term.

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