China is now implementing a foreign investment administration model of Pre-establishment National Treatment plus Negative List in accordance with the Foreign Investment Law of the PRC.

Pre-establishment National Treatment means foreign investors and investments are treated no less favourably than domestic investors and investments at the stage of investment entry.

The Negative List refers to the special entry management measures for foreign investment in specific areas stipulated by the State. Foreign investors are not allowed to invest in any area where investment is prohibited under the Negative List for Foreign Investment Access. For those areas where investment is restricted under the Negative List for Foreign Investment Access, foreign investors shall meet the conditions set forth in the Negative List for Foreign Investment Access. Areas not included on the Negative List for Foreign Investment Access shall be managed in accordance with the principle of equal treatment for domestic and foreign investment.

In addition to the Negative List for Foreign Investment Access, foreign investors shall also follow the Negative List for Market Access of the PRC, which sets out market entry rules for all investors, including domestic and foreign ones. In this list, the State Council of the PRC clearly lists the industries, areas, businesses, etc. that are forbidden or restricted from investing or operating in China. The Negative List for Market Access contains two categories, that is prohibited and licensed. For prohibited areas, market entities are not allowed to enter, government authorities are not allowed to approve and review, and relevant procedures are not allowed to progress. For licensed areas, market entities shall apply in accordance with qualification requirements and procedures, technical standards and licensing requirements, and government authorities are to make decisions on whether to grant access or not in accordance with the laws and regulations, or market entities shall gain access in compliance with the access conditions and methods stipulated by the government authorities. For industries, areas, and businesses not included on the Negative List for Market Access, all kinds of market entities shall be granted entry equally in accordance with the law.

Investors from foreign countries, Taiwan, Hong Kong and Macau wishing to invest in China’s mainland shall first find out whether their business scope falls under the restricted or prohibited category subject to the Negative List for Foreign Investment Access or the Negative List for Market Access of the PRC.

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