Highlights:

• Foreign investment projects in China are categorized into encouraged, permitted, restricted and prohibited projects.  The 2014 revisions to the Catalogue of Industries for Guiding Foreign Investment were made with the intention to substantially reduce the restricted projects, to loosen the restrictions on foreign shareholding percentage, and to primarily promote the opening-up of the manufacturing industry and service industry.
• In general, the 2014 Catalogue loosened the restrictions on the access by foreign investment in the fields of manufacturing, service industry and so on.  Restrictions on forms of foreign investment and foreign shareholding percentage were largely loosened, which is reflected by the reduction of the number of items requiring the form of “equity/cooperative joint venture” and also by the reduction of the number of items requiring “controlling by the Chinese party”.
• At the same time, the examination and approval of certain foreign investment projects became stricter.  For example, “higher education institutions (limited to equity/cooperative joint venture operations)” was moved from encouraged projects to restricted projects and “legal advisory service” was moved from the restricted projects to the prohibited projects (together with a change of the description to “advisory service on Chinese law matters”).
• The pre-establishment national treatment with a negative list approach is widely adopted by other countries in the world in the administration of foreign investment.  The “national treatment” means giving foreign investors and their investments treatment no less favorable than that given to one’s own investors and their investments under the same conditions.  The negative list sets out the measures concerning access by foreign investment that are not in conformity with the pre-establishment national treatment obligation, and reflects the concept that “absence of legal prohibition means freedom.”  We believe that in the future the 2014 Catalogue will definitely become an important basis for the formulation of the negative list.

The full article can be read here: Developments on Foreign Investment Administration – On the Catalogue of Industries for Guiding Foreign Investment (2014 Revision)