Encouraged, Permitted, Restricted and Prohibited Industries
As a matter of government policy and to comply with its requirement under the WTO, China has opened its economy considerably to investment by foreign companies. However, not all industrial sectors are open to foreign investment. Foreign investment in China is currently governed by the “Catalogue for Guiding Foreign Investment in Industries,” a detailed list of industry sectors that are classified as either: 1) Encouraged, 2) Permitted, 3) Restricted, or 4) Prohibited.
Encouraged and Permitted
Under the current system, governmental approval for investment in the “encouraged” or “permitted” categories is assumed to be granted automatically. The investment only needs to be registered with the government. Encouraged industries generally are ones in which the investment relates to new and or advanced technology to China, projects that meet an international demand not currently being met or increases product quality, projects that will increase exports, projects that can increase the efficiency in which manpower is used, and projects that conserve resources and protect the environment.
Examples of “encouraged” industries include:
● Water conservation technology
● Certain agriculture, forestry, and animal husbandry
● Mining
● Manufacturing
● Transportation
● Warehousing
● Real estate for ordinary apartments
● Sanitation, fitness, and social welfare industries
● Scientific research
● Education, culture, art, radio, film, and television industries
● Foreign funded projects that directly export all of their products
Restricted
Investments in “restricted” industries face more strict scrutiny from the government or require approval from higher levels of the government. Also, automatic approval of the investment cannot be assumed. Industries may be classified as restricted for a variety of reasons including where the technology has already been imported into China, where the industry would have an adverse affect on the environment or would not promote energy conservation, and industries that are highly regulated by the State or fall under State central planning.
Examples of “restricted” industries include:
● Certain agricultural, forestry, animal husbandry and fisheries
● Mining of precious metal and certain ores
● Certain manufacturing (tobacco, certain textiles)
● Electricity (adoption of low capacity generator)
● Certain telecommunications
● Certain wholesale and retail trade
● Electricity, gas, and water production
● Wholesale and retail of certain products
● Banking and insurance industries
● Real estate in high end property
● Public utilities
● Medical institutions
● Golf courses
● Production and distribution of radio and TV programming
● Land surveying
● Asset certification and appraisal
● Other industries restricted by the Chinese government
Prohibited
Investment in “prohibited” industries is completely off limits to foreign investment. Typically, investment in these industries is prohibited for the following reason:
● The project would endanger state security or harm the public
● The project would pollute the environment or endanger human health
● The project would occupy a large amount of current farmland
● The project would endanger the use of military resources
● The project would use manufacturing techniques that are unique to China
Examples of “prohibited” industries include:
● Breeding and growing of precious, high quality breeds of animals
● Development of certain types of plant seeds
● Mining of radioactive materials
● Arms and ammunition manufacturing
● Construction and operation of power grids
● Air traffic control
● Postal Services
● Futures trading
● Social research
● Gambling
● Pornography
● Publication of books, magazines, and newspaper |
