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Guide to Foreign Investment in China Industries

According to the Catalogue for the Guidance of Foreign Investment Industries revised on 1 April 2002, foreign investment in industries is classified under three categories: encouraged, restricted and prohibited.

The National Development and Reform Commission and the Ministry of Commerce (MOFCOM) further revised the catalogue in 2007(implemented on 1 December 2007). The revisions mainly cover five areas:

1.Expansion of the scope of liberalisation and promotion of industrial structure upgrade. In the manufacturing sector, foreign firms will be further encouraged to invest in the high-tech, equipment manufacturing and new materials production industries. In the services sector, China will, in fulfilling its WTO commitments, actively and appropriately expand the scope of  liberalisation by adding "service outsourcing", "modern logistics" and other items to the encouraged category and reducing items under the restricted and prohibited categories. Meanwhile,    foreign investment in traditional manufacturing industries in which domestic enterprises have already mastered the necessary technologies and have strong  production capacity will no  longer  be encouraged. It has also been clarified that the items under the restricted category in the Catalogue for the Guidance of Industrial Restructuring will apply to foreign investment.

2.Resources conservation and environmental protection. In order to encourage foreign investment in developing the recycle economy, clean production, renewable energy, ecological and environmental protection, as well as comprehensive utilisation of resources, relevant items have been added to the encouraged category in the catalogue. Foreign investment is no longer encouraged in projects involving important mineral resources that are rare in China or non-renewable. Also, the exploration of certain important non-renewable mineral resources is now  off-limits to foreign investment, while foreign investment in high energy consumption, high resources consumption and high pollution projects are restricted or prohibited.

3.Adjustment in export-oriented policy. In view of China's growing trade surpluses and fast  expanding foreign reserves, foreign trade policy encouraging exports will no longer be implemented.

4.Promotion of coordinated regional development. To promote coordinated regional development and taking into consideration the strategies of developing the western region, boosting the rise of the central region and rejuvenating the old industrial bases in the northeastern provinces, items that "apply only to the central and western  regions" have been removed from the encouraged category in the catalogue. Priority and niche industries in the central and western regions and old industrial bases in the northeastern provinces that encourage foreign investment may be included in the Catalogue for the Guidance of Foreign Investment in Priority Industries in the Central and Western Regions when the next revision is made.

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