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FDI: Entry and ownership rule
On December 29, 2011, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) jointly issued the Industry Catalogue for Guidance of Foreign Investments (Revised Version 2011), and this Revised Version 2011 replaced the previous 2007 Version and came into effect on January 30, 2012.
As the Revised Version 2011 will be the guidance for foreign investment in following 4 or 5 years, this Revised Version 2011 has caused attentions from foreign investors. This Revised Version 2011 contained 473 items, including 354 encouraged items (351 in 2007 Version), 80 restricted items (32 in 2007 Version) and 39 prohibited items (38 in 2007 Version).
And major changes of the Revised Version 2011 compared with the 2007 Version are listed as follows:
1. High Technology Manufacturing Industry
For the purpose of upgrading manufacturing industry structure, new products and new technologies concerning textile, chemicals and machine manufacturing industry are added in the Revised Version 2011. For the purpose of upgrading automobile manufacturing industry and avoiding over capability, automobile manufacturing was deleted from the encouraged item. And in addition, foreign investments in polysilicon and coal chemical industry are deleted from encouraged items.
2. Strategic Emerging Industries
For the purpose of developing strategic emerging industries, foreign investment in energy -saving industry, new generation information technology, biological industry, new energy and materials and new energy automobile will be encouraged. And in addition, key components manufacturing of new energy automobile, IPV 6 next generation internet system equipments manufacturing are added to the encouraged list.
3. Service Industry
For the purpose of boosting service industry development, 9 encouraged items are added to the encouraged list for foreign investment, which include foreign investments in motor vehicle charging stations, venture capital enterprises, intellectual property services, offshore oil pollution clean-up services, vocational skills training. And in addition, foreign investments in medical institutions and financial leasing companies are adjusted from restricted items to permitted list.
4. Real Estate Industry
Villa development and operation projects have been explicitly prohibited in the Revised Version 2011, and foreign investments are prohibited in these projects. While in Version 2007, foreign investments in villa development and operation are listed under the restricted item.
5. Publishing Business Industry
In accordance with the Revised Version 2011, the requirement that Chinese investor shall control the joint venture company in the field of distribution of audio and video will be deleted. And foreign investments are permitted in the field of master publishing of books, newspapers, journals and imports of books, newspapers, journals and audio &video products, while in Version 2007, these businesses are prohibited for foreign investments.
As the guiding foreign investment catalogue, the Revised Version 2011 will influence foreign investment in China in various industries. So, when foreign investors making investment decisions should refer to this Revised Version 2011 for considerations.
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