China to extend foreign investment rules nationwide by 2018

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Chinese rules on the limits of foreign investment are set to be rolled out nationwide, state media reported Tuesday, in a move welcomed by European investors.

The change is intended to open the market by allowing investment into any sector except those on a so-called “negative list” of industries protected by authorities.

Currently, only sectors explicitly listed in an investment catalogue are open to foreign involvement, in most of the country.

The new negative-list approach will be expanded to some regions between 2015 and 2017 and nationwide in 2018, the official Xinhua news agency reported.

Previous trial lists have been criticized for being so wide-ranging as to obstruct investment, but European Union Chamber of Commerce China president Joerg Wuttke greeted the latest announcement.

“The chamber has long advocated for the removal of the investment catalogue in favour of a short negative list with nationwide effect,” he told dpa.

Details of the list were not provided, but a trial list adopted in the Shanghai free-trade zone in 2014 was criticized.

It included items related to financial services, agricultural processing, and key manufacturing industries such as automobiles.

Even after revision, that list was only “an incremental step forward in China’s broad economic reforms, but of little practical use to foreign companies,” the US-China Business Council said.

Tuesday’s announcement followed the 16th Meeting of the Central Leading Group for Deepening Overall Reform last week, and Prime Minister Li Keqiang’s promise to relax restrictions on foreign capital in financial markets.

“We are speeding up structural reform,” Li told delegates to the World Economic Forum’s event in Dalian. “It’s true that the economy has come under downward pressure … but the Chinese economy will not have a hard landing,” he said.

Analysts say China is struggling to meet its growth target for 2015 of about 7 per cent – a figure that is itself a marked slowdown from GDP growth levels of recent years – amid sluggish investment growth and falling exports.

The country’s GDP grew 7.4 per cent in 2014, the weakest annual expansion in 24 years.

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