China law will clarify trade zones for investors

China is to introduce next year, earlier than anticipated, a long-promised ‘negative list’ of areas of activity.

Trade Minister Steven Ciobo has endorsed China’s new law. Picture Kym Smith.

China is to introduce next year a long-promised “negative list” of areas of activity, essentially economic rather than geographic, which are banned to foreign investors.

In theory, this would mean that sectors not listed should be open to Australian and other investors, a move welcomed by Trade Minister Steven Ciobo.

Xu Shanchang, a spokesman for China’s planning agency the National Development and Reform Commission, announcing a target date, said the list had been tested in pilot free-trade zones around the country, such testing being usual for major policy changes in China.

Mr Xu said “the introduction of the negative list is a creative ­approach” by global standards.

“It lays an important foundation to enable the market to play a decisive role in resource ­allocation,” he said.

China’s strategy until now has been to list sectors within which foreign investment is permitted. The new approach will allow investors to participate in the entire economy, except where areas are explicitly barred.

Tests have been held in Shanghai, Tianjin, Guangdong and Fujian, and are being extended to further areas including Zhejiang and Hubei, for fine-tuning.

The State Council, China’s cabinet, recently described this new approach to foreign investment as “more law-based, internationalised and convenient”.

It would promote growth and raise the quality of foreign investment, it said, adding it anticipated further relaxations: “The country should continue to reduce market access restrictions for foreign capital.”

China would introduce more fiscal and taxation policies to encourage overseas investors to expand investment, the State Council said.

It said foreigners would find it easier to get work permits as the government aimed to facilitate the cross-border flow of professionals with rules that would be introduced in the next three months.

Xinhua said this approach included ensuring the free outward remittance of profits and the ­protecting of intellectual property rights, and giving development zones more authority to manage investment, to provide industrial services that investors seek.

Among new areas in which China is seeking to attract foreign investors are electric vehicles, ship design, aircraft maintenance and passenger rail.

Bank of China researcher Gao Yuwei told Xinhua introducing a negative list would enhance the “resilience and competitiveness of China’s investment management system, helping China ­develop an open economy and leading to comprehensive reforms for the country’s economic and social management”.