China rolls back restrictions on foreign investment

China unveiled a long-awaited easing foreign investment curbs in sectors including banking, automotive and heavy industry, and agriculture, Beijing has moved to fulfill its promise to open their markets.

The national Commission for development and reform Commission of China (ndrc), China’s top economic planner, has published on its website a new version of the so-called negative list, which outlines sectors where foreign investment is restricted or prohibited. A new list will come into effect from July 28.

The number of items on the negative list were reduced from 63 to 48 in the previous version, published in June last year.

In addition to confirming already announced plans to remove restrictions of ownership entirely in such industries as insurance and cars over the next three to five years, China also ease and scrap ownership caps on businesses, including the manufacture of aircraft, electrical networks and breeding of agricultural crops, except wheat and corn.

The announcement came amid criticism from major trading partners China, the United States and the European Union. They argued that Chinese firms are largely free to invest in their markets, while Beijing restricts the ability of foreign companies to enter the second largest economy in the world.

In trade talks between the US delegation led by Secretary of the Treasury Steven Mnuchin and senior Chinese officials in early may, administration officials trump asked Beijing not distort trade through investment restrictions, sources familiar with the matter told Reuters at the time.

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The American side also asked China to ensure that any investment restrictions or imposed conditions were “narrow and transparent”, according to sources.

China has repeatedly said it will continue market reforms at their own pace, emphasizing its make and implement decisions on opening markets, on the basis of their own needs, and not because of external pressure.

Foreign businesses say progress has been slow and promises to expand access earlier repeatedly announced reforms that are long overdue.

China falls in April that it would adopt a series of measures by the end of this year.

Changes include the previously announced solutions that 51pc foreign ownership of brokerages and insurers of life, and to remove this cap by 2021. Current rules restricting a foreign financial interest of the organization in a Chinese commercial Bank 20pcs will also be cancelled on 28 July.

The rule that investments of various foreign financial institutions in Chinese commercial banks should not exceed 25 PC will also be cancelled.

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“We expect that China really let a few large foreign financial firms to open branches in such areas as securities, life insurance funds,” said Xu Weihong, the chief economist of avic securities. “China cannot let them all in at once, but we expect that he wants to demonstrate some examples of success.”

Restrictions on foreign ownership on the technical production of the car will be removed by 2022, as already announced. Restrictions on power grids, rail passenger and shipping companies will also be cancelled.

“China has made some bold moves to lift investment restrictions in many industries – including many that could be considered as a strategic investment and agriculture,” said Zhengyuan Bo, senior analyst, GRisk, political risk Analytics firm in Shanghai.

“However, it is important for investors to monitor the implementation of these new regulations closely, because China is still able to provide hard capital requirements, which may de facto exclude most foreign institutions from entering the Chinese market.”

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