State Council: Abolish all restrictions on foreign investment in the manufacturing sector

China's State Council recently approved the 2024 edition of the "Special Administrative Measures for Foreign Investment Access (Negative List)", the first update since 2021. The new negative list aims to further ease restrictions on foreign investment, especially in sectors such as manufacturing, telecommunications, education and healthcare.
Over the past decade, China has steadily reduced the number of restrictions on foreign investment. Each "subtraction" on the list means a more open field, with tangible opening effects. In the 2021 negative list, there are only two special management measures left in the manufacturing sector:
The printing of the publication must be controlled by the Chinese side.
It is prohibited for foreign capital to invest in the processing technology of steaming, stir-frying, broiling and calcining of traditional Chinese medicine decoction pieces and the production of confidential prescription products.
Thus, the "complete removal of restrictions on foreign investment in manufacturing" could mean:
Restrictions on foreign ownership in publications and printing will be lifted in 2024.
Foreign investment in the production of traditional Chinese medicine is allowed.
In addition to these two items, the "Special Management Measures for Foreign Investment Access in Pilot Free Trade Zones (Negative List) (2021 version)" implemented on January 1, 2022 has achieved zero restrictions on foreign investment access in the manufacturing sector of the free trade zone. The future will be implemented as soon as possible in the manufacturing sector foreign investment access restrictions zero requirements.
Telecommunication industry

In the negative list for foreign investment access in 2021, there are two special restrictions on foreign investment in telecommunications companies:
Value-added telecommunications business (except e-commerce, domestic multi-party communication, storage and forwarding, call center) foreign ownership shall not exceed 50%.
The basic telecoms business needs to be controlled by the Chinese.
As early as April 2024, China launched a pilot program in four pilot areas - Beijing, Shanghai, Hainan and Shenzhen - to relax foreign ownership restrictions on certain value-added telecommunications services (VATS). In the designated pilot areas, foreign ownership restrictions will be lifted on various value-added telecom service sectors, including Internet data centers (IDCs), content delivery networks (CDNS), Internet service providers (ISPs), online data and transaction processing, and specific types of information services. In addition, information protection and processing services will also benefit from this relaxation.
Impact on manufacturing

In the manufacturing sector, the new negative list has completely removed restrictions on foreign investment access. This means that foreign companies can freely invest in China's manufacturing sector, and are no longer limited by equity ratios and executive requirements. The move aims to attract more high-quality foreign investment and promote the transformation and upgrading of the domestic manufacturing industry.
From January to July 2024, 31,654 foreign-invested enterprises were newly established nationwide, an increase of 11.4 percent year-on-year. However, the actual use of foreign capital in the same period was 539.47 billion yuan (equivalent to 74.2 billion US dollars), down 29.6 percent year-on-year.
By industry, the actual use of foreign capital in manufacturing was 154.48 billion yuan (21.2 billion U.S. dollars), accounting for 28.6 percent of the country's actual use of foreign capital, an increase of 2.9 percentage points over the same period last year. The actual use of foreign capital in high-tech manufacturing was 69.58 billion yuan (9.6 billion U.S. dollars), accounting for 12.9 percent of the country's actual use of foreign capital, 2.6 percentage points higher than the same period last year. Among them, the actual use of foreign capital in medical equipment and instrument manufacturing, professional and technical services, computer and office equipment manufacturing and other industries increased by 87%, 41.3% and 32.4%.
In terms of origin, the actual investment of Germany and Singapore in China increased by 26.4 percent and 11 percent respectively.
Only "subtraction", not "addition", is the principle that China has always adhered to in the field of negative list, and it is also China's firm commitment to the speed and intensity of opening-up.
Overall, the update of the 2024 version of the negative list reflects the Chinese government's determination to further open up to the outside world, aiming to optimize the business environment and attract more foreign investment into the Chinese market.