2012 Foreign Investment Industrial Guidance Catalog Promulgated

China’s National Development and Reform Commission and Ministry of Commerce promulgated the 2012 Foreign Investment Industrial Guidance Catalog on December 24, 2011, which will take effect from January 30, 2012. The new Catalog replaces the previous version released in 2007.

The revisions revolve closely around the theme of accelerating the change in the direction of China’s economic development, and place great emphasis on improving the foreign investment structure, promoting technological innovation, as well as upgrading industries.

The key adjustments and changes in the new Catalog are summarized below:

1) Further broaden opening-up. To promote reform and development and create a good investment environment, the new Catalog increased the number of items in the encouraged categories on the one hand, and reduced items under the restricted and prohibited categories on the other. Further, restrictions on foreign investment equity ratio are removed in certain sectors – items with equity ratios restrictions are reduced by 11 compared to the 2007 Catalog.

2) Promote the transformation and upgrading of the manufacturing industry. The high-end manufacturing industry is one of the key sectors in which foreign investment is encouraged. Various new products and technologies in the textile, chemical and mechanical manufacturing industries have been added to the encouraged category in the new Catalog.

At the same time, to encourage foreign investment in the circular economy, the collection and treatment of waste electronic appliances and electronic products, mechanical and electrical equipment, and batteries have been added to the encouraged category.

Also, to promote the healthy development of the automobile industry, whole vehicle manufacturing has been removed from the encouraged category. Finally, to suppress over production and blind redundant construction in certain industries, polysilicon and coal chemical products have also been removed from the encouraged category.

3) Cultivate strategic new industries. Foreign investment is encouraged in strategic industries such as energy-saving and environmental protection, new-generation information technology, biology, high-end equipment manufacturing, new energy, new materials, and new energy vehicles. The new Catalog includes key component parts for new energy vehicles and next-generation internet system equipment based on IPv6, and removed the equity ratio requirement for new energy electricity-generating equipment.

4) Promote the development of the service industry. The new Catalog encourages foreign investment in the modern service industry and support the expanded utilization of foreign investment in service industries pertaining to people’s livelihood and welfare. Along these lines, nine service industries have been added to the encouraged category in the new Catalog, including motor vehicle charging stations, venture capital enterprises, intellectual property rights services, marine oil pollution clean-up technical services, vocational skills training, thus increasing the ratio of service industry items in the encouraged category. Further, foreign-invested medical institutions and finance lease companies have been moved from the restricted to the permitted category.

5) Promote the coordinated development of various regions. To thoroughly implement the Twelfth Five-Year Plan’s requirements to promote the development of the western region, comprehensively revitalize old industrial bases such as the northeast region, and promote the rise of the central region, a differential industrial guidance policy will continue to be implemented. Certain items that have been removed from the encouraged category will be considered when amending the Central and Western Region Foreign Investment Preferred Industries Catalog.

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