China: 2014 Negative List for the Shanghai Free Trade Zone … v0 30... · 2019. 10. 28. · China:...

China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater liberalisation? 1

21 August 2014

China: 2014 Negative List for the Shanghai Free

Trade Zone – Fulfilling the promise of greater

liberalisation?

China first introduced a negative list approach1 to foreign investment in the

China (Shanghai) Pilot Free Trade Zone (the “Zone”) in September 2013 (the

“2013 Negative List”).

To fulfil its commitment to shorten the 2013 Negative List, which was partly a

response to foreign investor and other stakeholder feedback, on 30 June

2014 the Shanghai municipal government unveiled a revised negative list (the

“2014 Negative List”). Compared to its previous incarnation, the 2014

Negative List contains foreign investment restrictions in 139 as opposed to

190 sectors, and reforms a significant number of the restrictions that remain.

We summarise the key reforms below and, for ease of reference, have set

out the details of the reforms in Appendix 1. Although in the context of the

national rules and unanswered questions facing foreign investment in the

PRC, the impact of certain changes in the 2014 Negative List may, on the

whole, have less impact than at first glance, a number of the revisions are

nonetheless expected to be of interest to foreign investors.

Services sectors

The main changes in the services sectors include:

Transportation – it is the Shanghai municipal government’s objective to

develop the Zone into an international shipping centre. Following this

policy, the 2014 Negative List introduces significant relaxation of the

restrictions facing foreign investors in the shipping industry, consolidating

and further developing the reforms released in February this year2.

Changes from the 2013 Negative List include (i) foreign investors can

hold a controlling stake in a Sino-foreign maritime transport joint venture

that engages in non-Chinese maritime transportation business; (ii) foreign

investors are now allowed to set up wholly foreign-owned entities to load

and unload cargo for international maritime freight transport, container

1 Establishment in the Zone of foreign-invested entities in industries that do not appear on the

negative list will generally only require a filing with the Shanghai municipal government and will no longer require prior foreign investment approvals from the Ministry of Commerce and National Development and Reform Commission.

2 Implementation measures announced on 8 February 2014 on the relaxation of certain

restrictions on foreign ownership of international shipping transportation and international shipping management businesses: http://www.moc.gov.cn/zfxxgk/bnssj/syj/201402/t20140208_1573450.html.

Contents Services sectors ............... 1

Manufacturing sectors ...... 3

Other changes .................. 3

Looking ahead .................. 4

Appendix – Summary of reforms .............................. 5

http://www.moc.gov.cn/zfxxgk/bnssj/syj/201402/t20140208_1573450.html

China: Revised Negative List for the Shanghai Free Trade Zone – Fulfilling the promise of greater

liberalisation? 2

station and container yard businesses and railway cargo transport

companies; (iii) the maximum permitted foreign shareholding in public

international shipping agency businesses is increased to 51%; and (iv)

foreign investors are allowed to invest in up to 49% of road service

stations through equity or cooperative joint ventures.

Healthcare – the 2014 Negative List no longer requires minimum foreign

investment of RMB20 million or imposes a limit of 20 years on the

operational term of foreign-invested medical institutions. This change may

encourage foreign investors to set up small-scale medical institutions

within the Zone. However, as the reference to medical institutions

remains in the 2014 Negative List, it is not clear whether the less

burdensome post-investment notification regime, which was implemented

as part of the negative list approach, applies to foreign investment in

medical institutions within the Zone. Nevertheless, it was reported on 18

July that a German investor intends to commence construction this year

of the first wholly foreign-owned hospital to be opened in the Zone3.

Retail – the 2013 Negative List restricted foreign investment in direct

selling business, again without specifying the scope of the restriction. The

2014 Negative List clarifies that a foreign investor may invest if (i) the

foreign investor has more than three years of experience in direct selling

in an overseas market; and (ii) the actual paid-in registered capital of the

foreign-invested company is not less than RMB80 million. In addition,

mail-order selling has been removed from the 2014 Negative List and the

foreign investment restriction on online retailing no longer applies to

general merchandise.

Financial services – reference to finance companies, trust companies

and currency brokerage companies has been removed from the 2014

Negative List. Further, the 2014 Negative List no longer states that

“investment in micro-credit companies and financing guarantee

companies shall comply with relevant regulations”. However, the 2014

Negative List includes a new statement that “investment in banking

institutions must comply with the existing regulations”. “Banking

institutions” are generally taken to mean those financial institutions that

are regulated by the China Banking Regulatory Commission (such as

finance companies, trust companies, currency brokerage companies,

micro-credit companies and financing guarantee companies), which

means that, despite the above change, effectively no reform in the

banking sector has been introduced.

Telecommunication – the 2013 Negative List restricted foreign

investment in telecommunication, radio, TV and satellite transmission.

The 2014 Negative List clarifies that foreign investment in basic

telecommunication services is allowed but foreign shareholding is capped

3 http://sh.people.com.cn/n/2014/0718/c355748-21706340.html.

http://sh.people.com.cn/n/2014/0718/c355748-21706340.html


liberalisation? 3

at 49%. Foreign investment in the broadcasting and satellite transmission

sectors remains prohibited.

Real estate – investment in real estate agents or brokerage firms has

been removed from the 2014 Negative List although, in reality, the impact

of this reform may be limited, as the market is already highly competitive

among domestic players. The 2014 Negative List also permits wholly

foreign-owned project companies established within the Zone to develop

tracts of land. However, further guidance from the authorities is required

as to whether these project companies may develop projects outside the

Zone.

Manufacturing sectors

Reforms in the manufacturing sectors mainly focus on high-tech sectors and

encourage R&D:

Vessel manufacturing – the 2014 Negative List enables foreign

investors to set up wholly foreign-owned companies in the Zone that

specialise in design of luxury cruise vessels, a sub-sector which is widely

believed to have huge growth potential in the Chinese market.

Aircraft and aeronautics equipment manufacturing – the 2014

Negative List allows foreign investors to set up wholly foreign-owned

companies within the Zone to engage in design and manufacture of aero-

engine related components.

Other reforms – some other changes include (i) removal of pulp and

paper manufacturing from the 2014 Negative List; (ii) allowing foreign

investors to invest in manufacturing of marine engineering equipment

through wholly foreign-owned entities, removing the previous requirement

for a Chinese partner to be the controlling shareholder; and (iii) allowing

foreign investors to set up wholly foreign-owned entities for investment in

manufacturing, research and development of automobile electronics,

automobile electronic bus-network technology, electronic controls in

electric power steering systems and wheeled and crawler cranes in

excess of 400 tonnes.

Other changes

Hong Kong and Macau investors – the 2014 Negative List introduces

reforms for Hong Kong and Macau investors to establish theatres without

a controlling Chinese partner and to provide certain air transportation

ground services through a wholly-owned entity. These reforms are not

applicable to non Hong Kong or Macau investors.

Consolidation – some changes are also attributable to consolidation of

related items. For example, the geological survey sector is now combined

with the oil and natural gas exploration sector in the 2014 Negative List.


liberalisation? 4

Looking ahead

There is no doubt that the 2014 Negative List is substantially shorter than the

2013 Negative List, yet it remains to be seen whether this shortened list can

bring substantial changes to the current foreign investment regime applicable

in the Zone. On one hand, out of the items removed, only about one-third

actually remove foreign investment restrictions, as opposed to consolidating

them or expressing them in a different way. On the other hand, the impact of

the reduced negative list may also be limited by the geographical limitation of

the Zone and the fact that it remains, in some cases, unclear whether Zone

enterprises (for example project companies as mentioned above) can

conduct business outside the Zone. Nevertheless, the attempt of the

Shanghai municipal government to increase the transparency of its negative

list (as shown by the reforms of the 2013 Negative List) and its promise to

keep its negative list continuously updated are to be welcomed and give hope

for further liberalisation of the Chinese market, albeit currently at a slower

pace than foreign investors may desire.

One repeated criticism from market participants of the negative list approach

has been that neither the 2013 Negative List nor the 2014 Negative List

generally provide a one-stop record of foreign investment restrictions in the

Zone. Both lists need to be read in conjunction with the Catalogue of

Industries for Guiding Foreign Investment (the “Catalogue”) and the rules of

industry regulatory bodies. For certain sectors (such as gambling), although

these have been removed from the 2014 Negative List, these reforms do not

mean that foreign investors are now given a “green light” to invest in these

sectors; rather, as these sectors are already restricted to both domestic and

foreign investors by Chinese law, they are not repeated in the 2014 Negative

List. Amid this and the other uncertainties described above, foreign investors

still do not have, in the 2014 Negative List, a one-stop source of guidance on

whether their potential investment can benefit from foreign investment

reforms allowed in the Zone. Interestingly, however, State leaders seem to

have taken note of market concern through indications that a nationwide

negative list will be formulated (without specifying the exact timing), which will

govern foreign investment and provide for equal access to the Chinese

markets in such a way that could replace the Catalogue4.

4 http://news.xinhuanet.com/fortune/2014-07/08/c_126725145.htm.


liberalisation? 5

Appendix – Summary of reforms

1 Restrictions removed from the 2014 Negative List

The following restrictions in the 2013 Negative List have been

removed from the 2014 Negative List:

Industry Category Removed item as it appeared in 2013

Negative List Head Category Sub-Category1 Sub-Category2

A

Agriculture,

Forestry, Animal

Husbandry and

Fishery

4. Foreign investment is

restricted in processing

of cotton (seed cotton).

B

Mining Industry

B07 Oil and Gas

Mining

4. Chinese-foreign

equity or contractual

joint venture is required

for foreign investment in

development and

application of enhanced

oil recovery and

relevant new

technologies.

5. Chinese-foreign




development and

application of new

technologies for oil

exploration and

exploitation in areas

such as geophysical

prospecting, drilling,

well logging, mud

logging, and down-hole

operation.

C

Manufacturing

Industries

C22

Papermaking and

Paper Products

C221 Pulp

Manufacturing

C222

Papermaking

Chinese-foreign equity

or contractual joint

venture is required for

single production line for

chemical wood pulp with

an annual production

capacity of 300,000

tonnes or more or single

production line for

chemi-mechanical wood

pulp with an annual

production capacity of


liberalisation? 6



100,000 tonnes or

more, mainly using

overseas timber

resources, and the

production lines for

high-grade paper or

paperboard built

simultaneously.

C25 Petroleum

Processing,

Coking and

Nuclear Fuel

Processing

C251 Refined Oil

Products

Manufacturing

Foreign investment is

restricted in

atmospheric and

vacuum refinery

production with an

annual output below 10

million tonnes, catalytic

cracking production with

an annual output below

1.5 million tonnes,

continuous reforming

production (including

aromatics extraction)

with an annual output

below 1 million tonnes,

and hydrogen cracking

production with an

annual output below 1.5

million tonnes.

C26

Manufacturing of

Chemical Raw

Materials and

Chemical

Products

C264

Manufacturing of

Paints, Inks,

Dyes and Similar

Products


restricted in production

of benzidine, dyes and

paints.

C27

Pharmaceutical

Industry

C272 Production

of Chemical

Medicine

Formulations



of chloramphenicol,

penicillin G, jiemycin,

gentamicin,

dihydrostreptomycin,

amikacin, totomycin,

oxytetracycline,

mydecamycin,

kitasamycin,

ciprofloxacin,

norfloxacin , ofloxacin,

analgin, paracetamol,

vitamin B1, vitamin B2,

vitamin C, vitamin E,

multiplex vitamin


liberalisation? 7



preparations, and oral

calcium preparations.

C28 Chemical

Fiber

Manufacturing

Industry

C282 Production

of synthetic fibre



of chemical fibre

drawnwork of

conventional chipper, as

well as viscose fibre.

C32 Non-ferrous

Metals Smelting

and Rolling

Processing

Industry

C321 Common

Non-ferrous

Metals Smelting


restricted in smelting of

electrolytic aluminium,

copper, lead, zinc and

other non-ferrous

metals.

C323 Rare Earth

Metals Smelting


restricted in smelting of

rare earth metals like

tungsten, molybdenum,

stannum (except tin

compounds) and

antimony (including

antimony oxide and

antimony sulphide).

C34 Common

Purpose

Equipment

Manufacturing

Industry

C343

Manufacturing of

Material Handling

Equipment

1. Chinese-foreign



for manufacturing of

wheeled and crawler

cranes not less than

400 tonnes.

C345

Manufacturing of

Axletrees, Gears

and

Transmission

Parts


restricted in

manufacturing of all

kinds of general (p0)

axletrees, accessories

(steel balls, cages) and

roughs.

C35 Special-

Purpose

Equipment

Manufacturing

C351

Manufacturing of

Mining

Metallurgical and

Construction

Equipment with

Special Purpose

2. Chinese parties shall

be controlling

shareholders for foreign

investment in marine

engineering equipment

(including modules).

C355

Manufacturing of

Textile, Clothing

Leather


restricted in

manufacturing of

equipment for ordinary


liberalisation? 8



Processing

Equipment with

Special Purpose

dacron filament and

short fiber.

C37 Railway,

Vessel,

Aerospace and

Other

Transportation

Equipment

Industries

C373

Manufacturing of

Vessels and

Retailed Devices

1. Chinese-foreign




design of luxury cruise

ships.

C375

Manufacturing of

Motorcycles

2. Chinese-foreign




manufacturing of key

parts and components,

as well as electronically-

controlled fuel injection

technology for high-

emission (>250ml)

motorcycles.

D Power, Heat,

Gas and Water

Production and

Supply

Industries

D 44 Power and

Heat Production

and Supply


restricted in construction

and operation of power

plants using coal-fired

and steam

condensation thermal

generator sets with a

single generator

capacity of 300,000

kilowatts or less and

thermoelectric power

stations using coal-fired,

steam condensation

and extraction thermal


single generator

capacity of 100,000

kilowatts or less within

small grids.


prohibited in

construction and

operation of power

plants using coal-fired

and steam

condensation thermal


single generator

capacity of 300,000


liberalisation? 9



kilowatts or less and

thermoelectric power

stations using coal-fired,

steam condensation

and extraction thermal


single generator

capacity of 100,000

kilowatts or less outside

small grids.

F Wholesale

and Retail

Industries

F51 Wholesale

Industry

F511 Wholesale

of Agriculture,

Forestry, Animal

Husbandry

Products


restricted in purchase of

grains, and wholesale

and distribution of

grains and cotton.

F 52 Retail

Industry

F524 Special

Retail of Cultural

and Sports

Products and

Apparatuses

2.Except for the case

where the service

providers from Hong

Kong and Macau are

permitted to distribute

audio-visual products

(including post-cinema

products) in a single

ownership, equity or

contractual joint venture

way, all investors from

other countries and

regions are restricted to

make investment in

distribution of audio-

visual products

(excluding

films) (limited to

contractual joint

venture).

G

Transportation,

Warehousing

and Postal

Service

Industries

G 53 Railway

Transportation

Industry

G 532 Railway

Freight

Transportation


restricted in railway

freight transport

companies (limited to



ventures).

G 55 Water

Transportation

Industry

G553 Auxiliary

Activities for

Water

Transportation

1. Chinese-foreign




loading and unloading

of international


liberalisation? 10



shipments, international

maritime container

freight station and

container yard services.

G 56 Air

Transportation

Industry

G 563 Auxiliary

Activities for Air

Transportation

2. Chinese parties shall

be controlling

shareholders for foreign

investment in aircraft

maintenance(with an

obligation to accept

tasks from international

maintenance market)

and aviation fuel

projects.

5. Except for the case

where the service

providers from Hong

Kong and Macau are

allowed to establish

wholly-owned air

transportation agencies,



venture is required for

the investment from

other countries or

regions in air

transportation agencies.

J Financial

Industry

J69 Other

Financial

Industries

J691

Financial Trust

and Management

4. Foreign investment in

micro-credit companies

and financing guarantee

companies shall be in

line with relevant

regulations.

K Real Estate

Industry

K 70 Real Estate

Industry

K701 Real Estate

Development and

Operation

1.Foreign investment is

restricted in

development of tracts of

land (limited to Chinese-

foreign equity or

contractual joint

ventures).

L Leasing and

Commercial

Service

Industries

L71 Leasing

Industry

L712 Cultural

and Daily

Commodities

Rental

1. The proportion of

investment by one

service provider from

Hong Kong and Macau

in chain operation of

books, newspapers and

periodicals rental shall


liberalisation? 11



not exceed 65%, and

the investment from

other countries and

regions in chain

operation of books,

newspapers, and

periodicals shall not

account for a majority

percentage if the

number of chain stores

is greater than 30.

2. Except for the case

where the service

providers from Hong

Kong and Macau are

permitted to rent audio-

visual products

(including post-cinema

products) in a single

ownership, equity or

contractual joint venture

way, all investors from

other countries and

regions are restricted

from investing in rental

of audio-visual products

(excluding films) (limited

to contractual joint

venture).

R Cultural,

Sports and

Entertainment

Industries

R87 Cultural and

Arts

Industries

Foreign investment in

cultural and arts

industries shall meet

related requirements.

R89

Entertainment

R891

Indoor

Entertainment

Activities


prohibited in business

premises for Internet-

access services

(cybercafé).

R893

Lottery Activities


prohibited in gambling

and lottery industry

(including horse race

tracks for gambling

purposes).

R899

Other

Entertainment

Activities


prohibited in

pornography industry.


liberalisation? 12

2 Restrictions relaxed in the 2014 Negative List

The foreign investment restrictions in the following sectors have been

relaxed in the 2014 Negative List as shown in the table below:

Category Item in 2013

Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

C

Manufacturing

Industries

C15

Liquor,

Beverage,

Refined Tea

Manufacturing

C153 Refined

Tea

Processing

Foreign

investment is

prohibited in

processing of

green tea and

special tea with

Chinese

traditional

techniques

(including

famous teas

and dark teas).

Chinese

parties shall be

controlling

shareholders

in processing

of green tea;

Foreign

investment is

prohibited in

processing of

special tea

with Chinese

traditional

techniques

(including

famous teas

and dark teas)

C35 Special-

Purpose

Equipment

Manufacturing

C351

Manufacturing

of Mining

Metallurgical

and

Construction

Equipment

with Special

Purpose

3. Foreign

investment is

restricted in

manufacturing

of bulldozers of

320

horsepower or

less, hydraulic

excavators of

30 tonnes or

less, wheeled

loaders of 6

tonnes or less,

graders, road

rollers and

forklifts of 220

horsepower or

less,

electrically

driven off-

highway dump

trucks of 135

tonnes or less,

hydro-

mechanically

No change,

except that the

restrictions do

not apply to (i)

hydraulic

excavators of

below 15

tonnes and (ii)

wheeled

loaders of

below 3

tonnes.


liberalisation? 13


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

driven off-

highway dump

trucks of 60

tonnes or less,

asphalt

concrete

mixing and

paving

equipment,

high-altitude

operation

machinery,

garden

machinery and

tools, and

ready-mixed

concrete

machinery

(pilot pumps,

agitating

lorries, mixing

stations, and

pump trucks).

C36

Automobile

Industry

C366

Manufacturing

of Vehicle

Parts and

Accessories

1.

Manufacturing

and research

and

development of

automobile

electronic

devices:

Chinese-

foreign equity

is required for

foreign

investment in

automobile

electronic bus

network

technologies

and electronic

controllers for

electric power

steering

system, and

Chinese-

foreign equity

or contractual

1. Chinese-

foreign equity

or contractual

joint venture is

required for

foreign

investment of

manufacturing

and research

and

development

in embedded

electronic

integrated

systems.


liberalisation? 14


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

joint venture is

required for

foreign

investment in

embedded

electronic

integrated

systems.

C37 Railway,

Vessel,

Aerospace

and Other

Transportation

Equipment

Industries

C371Manufact

uring of

Railway

Transportation

Equipment

C372

Manufacturing

of Urban Track

Transportation

Equipment

Chinese-

foreign equity

or contractual

joint venture is

required for

foreign

investment in

track

transportation

equipment,

including

research and

development,

design, and

manufacturing

of vehicles and

key parts and

components

(traction drive

system, control

system, and

brake system)

of

transportation

equipment for

high-speed

railway, special

lines for railway

passenger

transportation,

intercity

railway, trunk

railway, and

urban track

transportation;

research and

development,

design, and

manufacturing

of service

Chinese-

foreign equity

or contractual

joint venture is

required for

foreign

investment in

track

transportation

equipment,

including

research and

development,

design, and

manufacturing

of vehicles and

key parts and

components

(traction drive

system, control

system, and

brake system)

of

transportation

equipment for

high-speed

railway,

special lines

for railway

passenger

transportation,

intercity

railway, trunk

railway, and

urban track

transportation;

research and

development,

design, and

manufacturing


liberalisation? 15


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

facilities and

equipment for

high-speed

railway, special

lines for railway

passenger

transportation,

intercity

railway, and

urban track

transportation;

design and

research and

development of

relevant

information

systems during

information

technology

development;

research and

development,

design, and

manufacturing

of track and

bridge facilities

for high-speed

railway, special

lines for railway

passenger

transportation

and intercity

railway;

research and

development,

design, and

manufacturing

of track

transportation

signal systems;

manufacturing

of electrified

railway

equipment and

apparatus,

research and

development of

railway noise

of service

facilities and

equipment for

high-speed

railway,

special lines

for railway

passenger

transportation,

intercity

railway, and

urban track

transportation;

design and

research and

development

of relevant

information

systems during

information

technology

development;

research and

development,

design, and

manufacturing

of track

transportation

signal

systems;

research and

development

of railway

noise and

vibration

control

technology,

and

manufacturing

of railway

transportation

safety

monitoring

equipment.


liberalisation? 16


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

and vibration

control

technology,

manufacturing

of waste

discharge

equipment for

railway

passenger

trains, and

manufacturing

of railway

transportation

safety

monitoring

equipment.

C375

Manufacturing

of Motorcycles

1. The

proportion of

the shares held

by Chinese

parties in a

Sino-foreign

joint venture of

motorcycles

shall be 50% or

more. One of

the legal

persons of the

Chinese party

shall be

relatively

controlling

shareholder

owning shares

more than the

amount held by

their foreign

counterparts

when a listed

joint-stock

company of

motorcycles

sells corporate

shares to

external

parties. A

foreign

company that

No change

except that the

requirement

for Chinese

control does

not apply to

motorcycles

with emissions

of below

250ml.


liberalisation? 17


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

is allowed to

establish up to

2 joint ventures

in China

producing the

same type of

motorcycles is

permitted to

establish more

than 2 joint

ventures by

acquiring other

domestic

companies

together with

Chinese parties

in a joint-

venture way.

C38 Electric

Machinery and

Equipment

Manufacturing

C381

Manufacturing

of Motors

2. Chinese-

foreign equity

or contractual

joint venture is

required for

foreign

investment in

manufacturing

of power

transmission

and

transformation

equipment:

amorphous

alloy

transformers,

operating gears

for high-voltage

switches of 500

kilowatts or

more, arc-

control devices,

large disc

insulators

(1,000 KV, 50

KA or more),

outlet devices

and sleeves

used for 500

KV or more

No change,

except that a

joint venture is

not required

for foreign

investment in

contact

materials for

electrical

appliances in

conformity with

EU RoHS

Directive, and

Pb-free and

Cd-free

solders.


liberalisation? 18


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

transformers

(500, 750 and

1,000 KV AC

and all

specifications

for DC),

voltage

regulating

switches (on-

load or no-load

voltage

regulating

switches of

500, 750 and

1,000 KV AC),

dry-type

smoothing

reactors for

direct current

transmission,

converter

valves for ±800

KV direct

current

transmission

(water coolers

and DC field

equipment),

contact

materials for

electrical

appliances in

conformity with

EU RoHS

Directive, and

Pb-free and

Cd-free

solders.

F Wholesale

and Retail

Industries

F51

Wholesale

Industry

F512

Wholesale of

Foods,

Beverages

and Tobacco

Products

1.Foreign

investment is

restricted in

wholesale and

distribution of

vegetable oil,

sugar and

tobacco.

2. Foreign

investment is

1.Foreign

investment is

restricted in

wholesale and

distribution of

tobacco.


liberalisation? 19


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

prohibited in

wholesale of

salt.

F516

Wholesale of

Mineral

Products,

Building

Materials and

Chemical

Products

Foreign

investment is

restricted in

wholesale and

distribution of

crude oil,

fertilizers,

agricultural

chemicals,

agricultural

plastic film,

product oil

(including

bounded oil).

Foreign

investment is

restricted in

wholesale and

distribution of

crude oil,

fertilizers,

agricultural

chemicals,

agricultural

plastic film,

bounded oil.

F 52 Retail

Industry

F521 General

Retail

Foreign

investment is

restricted in

retail and

distribution of

cotton, crude

oil, agricultural

chemicals,

agricultural

plastic film, and

fertilizers (in

the case of

selling products

of different

varieties and

brands from

multiple

suppliers

through more

than 30 chain

stores, the

Chinese parties

shall be

controlling

shareholders).

No change,

except that the

restriction

does not apply

to agricultural

chemicals and

agricultural

plastic film.

F522 Special

Retail of

Foods,

Beverages

and Tobacco

Products

Foreign

investment is

restricted in

retail and

distribution of

grains, cotton,

No change,

except that the

restriction

does not apply

to grains,

cotton,


liberalisation? 20


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

vegetable oil,

sugar and

tobacco (in the

case of selling

products of

different

varieties and

brands from

multiple

suppliers

through more

than 30 chain

stores, the

Chinese parties

shall be

controlling

shareholders).

vegetable oil

and sugar.

F529 Booth,

Non-Store or

Other Retails

Foreign

investment is

restricted in

direct sales,

mail orders and

online sales.

Foreign

investment is

restricted in

direct sales;

the investors

shall possess

more than

three-year

experience in

overseas

direct sales,

and the actual

paid-up

registered

capital shall be

no less than

RMB80 million.

Foreign

investment is

restricted in

online sales

(excluding

online sales of

general

merchandise).

G

Transportatio

n,

Warehousing

and Postal

G 54 Road

Transportation

Industry

G 542 Road

Passenger

Transportation

Foreign

investment is

restricted in

road passenger

transport

companies

No change,

except that the

49% cap only

applies to

scheduled

transportation,


liberalisation? 21


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

Service

Industries

(limited to

Chinese-

foreign equity

ventures), the

proportion of

foreign

investment

shall not

exceed 49%,

and at least

one of the

major investors

shall be a

company that

has been

operating road

passenger

transportation

service in

China for 5 or

more years.

tourism

transportation

and package

transportation.

G 55 Water

Transportation

Industry

G 551 Water

Passenger

Transportation

G 552Water

Freight

Transportation

Foreign

investment is

restricted in

water transport

companies

(Chinese

parties as

controlling

shareholders),

and Chinese

parties shall be

controlling

shareholders

for foreign

investment in

scheduled or

non-scheduled

international

marine

transportation

services.

Foreign

investment is

restricted in

water transport

companies

(Chinese

parties as

controlling

shareholders),

and foreign

investment in

scheduled or

non-scheduled

international

marine

transportation

services shall

be limited to

Chinese-

foreign equity

or contractual

joint ventures.

G553 Auxiliary

Activities for

Water

Transportation

2. Foreign

investment is

restricted in

vessel

agencies

No change,

except that the

maximum

permitted

foreign


liberalisation? 22


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

(Chinese

parties as

controlling

shareholders).

shareholding

in a public

international

shipping

agency is

51%.

G 56 Air

Transportation

Industry

G 563

Auxiliary

Activities for

Air

Transportation

1. Except for

service

providers from

Hong Kong and

Macau, the

proportion of

investment

made by

investors from

other countries

and regions in

auxiliary

aviation

services shall

meet the

requirements of

foreign

investment

percentage,

and the

operation

period shall not

exceed 30

years.

3. Foreign

investment in

civil aviation

computer

booking

systems is

prohibited,

other than by

Hong Kong or

Macau

investors in

joint ventures

controlled by

Chinese

mainland

investors.

1. Except that

Hong Kong

and Macau

investors can

invest in

agency

services,

upload &

download

controlling

service,

communication

& off-harbor

controlling

system

service,

container

equipment

management

service,

passenger &

luggage

service, cargo

& mail service,

tarmac

service, and

aircraft service

by setting up

wholly-foreign

owned

companies,

investors from

other countries

and regions

can only invest

in auxiliary

aviation

services by

entering into

joint ventures

with Chinese

partners.


liberalisation? 23


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

3. Foreign

investment in

civil aviation

computer

booking

systems is

prohibited,

other than by

service

providers from

WTO member

states in

accordance

with a free

trade zone

agreement

with China, in

joint ventures

controlled by

Chinese

mainland

entities and

where a

Chinese

mainland

computer

booking

system service

provider is a

party. The

investment

must satisfy an

economic

needs test.

I Information

Transmission,

Software and

IT Service

Industries

I63

Telecommunic

ation, Radio&

Television and

Satellite

Transmission

Services

I631

Telecommunic

ation

I632 Radio&

Television

Transmission

Services

1.Foreign

investment is

restricted in

telecommunica

tion, radio&

television and

satellite

transmission

services.

1.Foreign

investment is

restricted in

basic

telecommunica

tion service

(the proportion

of the foreign

shareholding

shall not

exceed 49%).

J Financial

Industry

J66 Monetary

and Financial

1.Foreign

investment is

restricted in

1.Foreign

investment in

banking


liberalisation? 24


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

Services

J67 Capital

Market

Services J68

Insurance

Industry

J69 Other

Financial

Industries

banks, financial

companies,

trust

companies,

and currency

brokerage

companies

financial

institutions

shall meet

related

requirements.

K Real Estate

Industry

K 70 Real

Estate

Industry

K701 Real

Estate

Development

and Operation

2. Foreign

investment is

restricted in

construction

and operation

of high-class

hotels, high-

class office

buildings,

international

exhibition

centers, large-

scale

agricultural

products

wholesale

markets.

2. Foreign

investment is

restricted in

construction

and operation

of high-class

hotels, high-

class office

buildings,

international

exhibition

centers by

means of

project

companies.

K703 Real

Estate

Intermediary

Services

Foreign

investment is

restricted in

real estate

secondary

market

transactions

and real estate

intermediary or

brokerage

companies.

Foreign

investment is

restricted in

real estate

secondary

market

transactions by

means of

project

companies.

M Scientific

Research and

Technical

Services

M74

Professional

Technical

Services

M744

Surveying and

Mapping

Services

2. Foreign

investment is

prohibited in

geodetic

surveying,

marine

charting, aerial

photography

for surveying

and mapping

purposes,

2. Foreign

investment is

prohibited in

geodetic

surveying,

marine

charting, aerial

photography

for surveying

and mapping

purposes,


liberalisation? 25


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

administrative

boundary

surveying and

mapping,

topographic

map

compilations

and general

map

compilations,

and

compilations of

electronic

maps for

navigation

purposes.

administrative

boundary

surveying and

mapping,

topographic

map

compilations,

global

administrative

map, national

administrative

map, regional

(at or beneath

province level)

administrative

map, national

educational

map, regional

educational

map, and real-

3D map

compilations,

and

compilations of

electronic

maps for

navigation

purposes, as

well as other

mapping

activities

stipulated by

mapping

administrations

of State

Council.

Q Healthcare

and Social

Works

Q 83

Healthcare

The amount of

foreign

investment in

medical

institutions

shall not be

less than RMB

20 million, no

branch is

permitted to be

established,

and the

No branch is

permitted to be

established by

a foreign-

invested in

medical

institution.


liberalisation? 26


Negative List

Revised item

in 2014

Negative List Head

Category

Sub-

Category1

Sub-

Category2

operation

period shall not

exceed 20

years.

R Cultural,

Sports and

Entertainment

Industries

R86

Radio,

Television,

Film and

Studio

Production

Industries

1.Foreign

investment is

restricted in

construction

and operation

of movie

theaters

(Chinese

parties as

controlling

shareholders).

1.Unless the

service

provider is a

Hong

Kong/Macau

investor,

foreign

investment is

restricted in

construction

and operation

of movie

theatres

(Chinese

parties as

controlling

shareholders).

China: Revised Negative List for Shanghai Free Trade Zone – Fulfilling the promise of greater liberalisation? 27

This publication is intended merely to highlight issues and not to be comprehensive, nor to provide legal advice. Should you have any questions on issues reported here or on other areas of law, please contact one of your regular contacts, or contact the editors.

© Linklaters. All Rights reserved 2014

Linklaters Hong Kong is a law firm affiliated with Linklaters LLP, a limited liability partnership registered in England and Wales with registered number OC326345. It is a law firm authorised and regulated by the Solicitors Regulation Authority. The term partner in relation to Linklaters LLP is used to refer to a member of the LLP or an employee or consultant of Linklaters LLP or any of its affiliated firms or entities with equivalent standing and qualifications. A list of the names of the members of Linklaters LLP and of the non-members who are designated as partners and their professional qualifications is open to inspection at its registered office, One Silk Street, London EC2Y 8HQ, England or on www.linklaters.com.

Please refer to www.linklaters.com/regulation for important information on our regulatory position.

We currently hold your contact details, which we use to send you newsletters such as this and for other marketing and business communications.

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A18376577

Contacts

For further information please

contact the following or your

usual Linklaters contacts:

Fang Jian Partner (+86) 21 2891 1858 [email protected]

Richard Gu Senior Consultant (+86) 21 2891 1839 [email protected]

Annabella Fu van Bijnen Partner (+86) 10 6535 0660 [email protected]

Bryan Chan

Senior Counsel (+86) 21 2891 1811 [email protected]

Eric Liu

Counsel (+86) 21 2891 1841 [email protected]

Linklaters LLP Shanghai Office

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Linklaters.com

Reference: Special Administrative Measures (Negative List) on Foreign

Investment Access to the China (Shanghai) Pilot Free Trade Zone (2014

Amendments) (中国（上海）自由贸易试验区外商投资准入特别管理措施（负面

清单）（2014 年修订）)

Issuing authority: Shanghai municipal government

For our previous publications regarding the Zone, please refer to:

“Shanghai Free Trade Zone implements modern arbitration rules”

“One Step Closer to Liberalisation – Formal Unveiling of the Shanghai Free

Trade Zone’s Free Trade Account”

“Shanghai Free Trade Zone’s New Foreign Exchange Regime”

“Internalisation of the RMB in the Shanghai Free Trade Zone – A Step Forward”

“Shanghai Free Trade Zone opens to foreign investment in telecoms services”

“The Shanghai Free Trade Zone opens up to foreign investment in value added

telecoms services”

“PBOC to liberalise capital flows in the Shanghai Free Trade Zone”

“Shanghai Free Trade Zone – a powerful springboard to China’s commodities

markets”

“SAIC Issues Registration Rules for the Shanghai Free Trade Zone”

“Launch of the Shanghai Pilot Free Trade Zone”

mailto:[email protected]

mailto:[email protected]

http://www.linklaters.com/Publications/AsiaNews/LinkstoChina/Pages/Shanghai-Free-Trade-Zone-implements-arbitration-rules.aspx

http://www.linklaters.com/Publications/AsiaNews/LinkstoChina/Pages/Formal-Unveiling-Shanghai-Free-Trade-Zone-Account.aspx

http://www.linklaters.com/Publications/AsiaNews/LinkstoChina/Pages/Formal-Unveiling-Shanghai-Free-Trade-Zone-Account.aspx

http://www.linklaters.com/Publications/AsiaNews/LinkstoChina/Pages/Shanghai-Free-Trade-Zone-New-Foreign-Exchange-Regime.aspx

http://www.linklaters.com/Publications/AsiaNews/LinkstoChina/Pages/Internationalisation-RMB-in-Shanghai-Free-Trade-Zone.aspx

http://www.linklaters.com/Publications/Publication1403Newsletter/TMT-News-31-January-2014/Pages/China-Shanghai-Free-Trade-Zone-opens-foreign-investment-intelecoms-services.aspx

http://www.linklaters.com/Publications/AsiaNews/LinkstoChina/Pages/Shanghai-Free-Trade-Zone-opens-foreign-investment.aspx

http://www.linklaters.com/Publications/AsiaNews/LinkstoChina/Pages/Shanghai-Free-Trade-Zone-opens-foreign-investment.aspx

http://www.linklaters.com/Publications/AsiaNews/LinkstoChina/Pages/PBOC-liberalise-capital-flows-Shanghai-Free-Trade-Zone.aspx

http://www.linklaters.com/Publications/AsiaNews/Pages/Shanghai-Free-Trade-Zone-commodities-markets.aspx

http://www.linklaters.com/Publications/AsiaNews/Pages/Shanghai-Free-Trade-Zone-commodities-markets.aspx

http://www.linklaters.com/Publications/AsiaNews/LinkstoChina/Pages/SAICIssuesRegistrationRulesShanghaiFreeTradeZone.aspx

http://www.linklaters.com/Publications/AsiaNews/LinkstoChina/Pages/Launch-Shanghai-Pilot-Free-Trade-Zone.aspx

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