On October 31, 2007 the National Development and Reform Commission and the MOFCOM jointly issued a revised Foreign Investment Industrial Guidance Catalogue that became effective as of December 1, 2007. The new Catalogue contains numerous significant changes of orientation compared with the previous version adopted in 2004.
 
The new Catalogue covers are 478 activities, of which 351 are encouraged (94 more than in the 2004 version), 87 are restricted (9 more) and 40 prohibited (5 more). In general, the new Catalogue improves access of foreign investors to commercial and financial services , to activities contributing to environmental protection,  ,and to advanced manufacturing activities , while increasing restrictions on foreign investments in real estate , in media-related activities  and in production activities for which foreign investment is no longer considered necessary to assure future development.
 
In terms of encouraged investments, the new policy admits into this category:
 
- -       high tech industries such as equipment production and the production of advanced materials, such as might for instance be used for the production of automobiles; clothing manufacturing by computer-integrated systems; organically macromolecular materials, innovative diagnosis reagents, optical fibers for laser treatment; hydrogen energy equipment, rocket technology for civilian use; totally biodegradable materials; nuclear power, thermal power equipment seals design, manufacture; nuclear power by large cast parts manufacturing equipment;
 
- -       communication equipment, computer and other electronic equipment manufacturing;
 
- -       transportation equipment such as civilian helicopter parts manufacturing, ground, and surface effect aircraft manufacturing; civilian launch vehicle design and manufacturing, spacecraft-mechanical and electrical products, the spacecraft temperature control products, product testing equipment on satellites, spacecraft structures and body products manufacturing;
 
- -       luxury goods (textiles, leather, fur, carpets);
 
- -       international service subcontracting;
 
- -       modern logistics;
 
- -       clean energy production, renewable energy research and development, environmental protection;
 
- -       business services including outsourcing of system application management and maintenance, information technology support management, banking back office services, financial clearing, human resources services, software development, call centers, data processing;
 
- -       development and production of green foods;
 
- -       culture, sports and recreation, such as performance establishment operators; stadium operations, fitness, sports competitions and performances, training and intermediary services.
 
On the other hand, in conventional manufacturing industries, where domestic enterprises have fully mastered the technology, such as the dairy industry, foreign investment is no longer encouraged.  In response to the coutrny'scountry's mammoth trade surplus, the encouragements for 100% export-oriented investments have been dropped.
 
The revised policy restricts or prohibits foreign investments in high energy-consuming and pollution-generating projects. Foreign investments in the commodities business are no longer prohibited but remain subject to restrictions.
 
In line with its WTO accession commitments, the limit on foreign ownership in domestic and international basic telecommunications business should be raised from 35% to 49% no later than December 11, 2007.
 
 

By Daniel A. Lapres in collaboration with the international team of Kunlun Law Firm Beijing Office.