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Investing in China: opportunities and challenges coexist

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26 July 2019

At a time when U.S.-China trade tensions are being reported as having a dramatic impact on the global economy, China’s Ministry of Commerce has announced that the actual use of foreign capital in China is still increasing steadily, indicating that foreign investment into China’s economy is not yet being significantly affected by the trade war. In the first half of 2019, a total of 20,131 foreign invested enterprises were newly established in China, with the actual deployment of foreign capital reaching RMB478.33 billion, an increase of 7.2% year on year (equivalent to USD70.74bn, up 3.5% year on year) (excluding the data in the banking, securities and insurance sectors).


Since 2013, China has been progressively moving to a system of pre-entry national treatment, with foreign investment generally permitted, other than in sectors or industries contained in a “Negative List”. In 2019, the Chinese government has extended its reforms by releasing a number of regulations, which are summarized below. Although it remains to be seen how these measures will be implemented and enforced at a local level, there is good reason to believe that China remains committed to liberalising market access and to facilitating greater foreign participation in its economy.

  • On 15 March 2019, the Chinese government announced the new Foreign Investment Law (FIL), which will take effect on 1 January 2020. Please click here for more information.

  • On 30 June 2019 (after the U.S. and China had reached a temporary trade war truce at the G20 Summit in Osaka), the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) jointly announced and published two revised Negative Lists (a Nationwide Negative List and an FTZ Negative List) governing foreign investment and the new Catalogue of Encouraged Industries for Foreign Investment (the Industries Catalogue), all of which will enter into force on 30 July 2019. Please click here for more information.

  • On 2 July 2019, Premier Li Keqiang announced that China would accelerate the liberalisation of the securities, futures and life insurance sectors, with majority foreign ownership of securities companies to be permitted by 2020, ahead of the previously announced target of 2021.

  • On 20 July, 2019, the Financial Stability and Development Committee under the State Council announced further reforms to open-up a number of financial areas to foreign investment, including the credit rating business, banking wealth management subsidiary/wealth management companies, the pension funds business, money brokerage, insurance business, securities business, CIBM, etc.

Notwithstanding all of these positive developments, on 31 May 2019 MOFCOM announced that the Chinese government will in the near future establish an “unreliable entity” regime, under which foreign enterprises, organisations and individuals who fail to comply with market principles, or who ignore boycotts or cut-off supplies to Chinese enterprises for non-commercial purposes, or who cause serious damage to Chinese companies, will be designated as “unreliable entities”.

With opportunities and challenges coexisting in China, are you ready to invest or to increase investment in the country? Allen & Overy has in-depth knowledge of investment in China across a variety of industries, including oil and gas, life sciences, technology, media, telecommunications, mining, manufacturing, infrastructure, consumer and retail etc., and has successfully assisted a wide range of foreign investors in completing their investment in China.

If you are interested in discussing and learning about how the new measures may impact your plans for investment in China, how to effectively mitigate risks, or how to ensure legal compliance in specific sectors, please do not hesitate to contact us.