Last Friday, China’s National Development & Reform Commission (NDRC) and Ministry of Commerce (MofCom) published draft revisions to the Market Access Negative List (hereafter referred to as ‘the List’). The List should not be confused with the Foreign Investment Negative List.
The List is usually officially published in December and outlines the rules for investment in various sectors for all market entities, including state-owned enterprises (SOEs), private companies, joint venture partnerships (JVs) and wholly foreign-owned enterprises (WFOEs). Each year, NDRC and MofCom divide the list into two categories, ‘prohibited’ and ‘restricted’ markets — this year’s edition is no different.
The industries listed as ‘prohibited’ are all off-limits to market actors, meaning that firms are not allowed to invest, partner or takeover any entity involved in that particular industry. This year’s list has attracted more attention than usual in foreign media because news collection, editing and broadcasting could become a prohibited industry. It is worth noting that items listed under ‘prohibited’ are usually ostensibly related to government activity or national security.
This year’s list has attracted more attention than usual in foreign media because news collection, editing and broadcasting could become a prohibited industry
Sectors determined to be ‘restricted’ are open to investment but only under the condition that the investor applies for access from whichever ministry oversees that particular industry. Industries considered ‘restricted’ include motor vehicle production and hotel management, to provide two examples. Foreign and domestic investors alike can assume that any area not covered by the list is open to investment and that there is no need to seek prior approval.
The 2021 draft sees the number of industries where involvement is either restricted or prohibited cut from 123 items in 2020 to 117. While that suggests that China’s economy is becoming more open, investors must consult the Market Access Negative List alongside the Foreign Investment Negative List and the Free Trade Zone Negative List for Foreign Investment, and these frequently contradict one another. As a result, the list does not appear to open China’s economy further to foreign investors as much as might be expected.
Seven items look set to come off the list and concern the financial services sector, leasing, and the provision of business services:
This year’s list is marginally shorter, coming in at 117 items. However, the business activities that NDRC and MofCom have added or expanded on in this year’s edition include cryptocurrency mining and the investment of “non-public” capital into a range of publishing activities, including live broadcasts, news-gathering, editing and broadcasting entities, and the operation of news.
Neither the inclusion of cryptocurrency mining or the restrictions on China’s media sector represents a new ban; the government had already indicated to investors through other pronouncements and channels that they are off-limits. However, their inclusion serves as a way of reiterating that such industries are not in line with the Party’s perception of China’s economy — over the last year, the government has sought proactively to ensure that companies operating within the media space are not “polluting” society or publishing content that violates the core values of socialism, for example.
In the case of China’s media sector, its inclusion is indicative of a sustained push by the government to take an even tighter grip on the reins as entry limits on internet-based news services for non-public capital were added in the 2020 List.
Firstly, the fact that NDRC and MofCom provided less than five working days for businesses to respond with comments follows a trend where the public is increasingly being given less time to give their input on policy — public consultations used to run for as long as one month.
Secondly, businesses need greater clarity from NDRC and MofCom to ascertain whether Item Code: 10006 — which relates to prohibitions on news-media related operations involving non-public capital, and its provisions concerning “live broadcasting” — would cover foreign sporting events, such as the Premier League and Wimbledon.
Thirdly, despite a spate of opening up activity of late, the construction industry remains on the list, requiring all private construction companies to be approved as qualified construction enterprises. While the relevant requirements outlined on the List are equal for Chinese and foreign-invested enterprises, the reality is that foreign businesses find it harder than their Chinese counterparts to obtain such qualifications.
Finally, private enterprises wanting to provide arts examinations — such as those for music grades — still need approval from the Ministry of Culture and Tourism before providing assessments, despite the assessed content not being politically sensitive.
CBBC has responded to the public call for comment and welcomes the removal of items from the List. We anticipate that the removal of these items will improve the ease of doing business for private enterprises operating in these areas. Whether the Market Access Negative List opens the China market to foreign firms, only time will tell. CBBC looks forward to the publication of a complementary revised Foreign Investment Negative List.
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