Negative list for foreign investment expanded to inland regions

More inland regions are to be selected for implementation of the country's "negative list" system for foreign investors, according to China's top economic planner.

The negative list refers to sectors and businesses that are off-limits to foreign investment, and is an extension to the existing investment-approval method of specifying categories that are "encouraged", "prohibited" or "restricted".

The negative list method was first adopted in the China (Shanghai) Pilot Free Trade Zone after it opened in 2013. Free trade zones were subsequently launched in Guangdong, Tianjin and Fujian, and they too adopted negative lists.

Xu Shanchang, director of economic system reform at the National Development and Reform Commission, said on Friday the practice will be expanded from the coastal regions to inland areas.

"We plan to choose more provinces in the central, west and northwest of China to practice the negative list method. In the selection of which regions, all should have good fundamentals which allow a deepening of economic reforms," Xu told a news conference.

The term negative list first emerged during international investment treaty negotiations, and is now common practice globally, with many countries outlining sectors that are key to national security or sensitive to increased foreign competition.

A new market-access system announcement last month extended the negative list concept to domestic investment too as well as foreign, and was seen as a major economic innovation. Officials said the new national market-access list for both domestic and foreign investors will be promoted in pilot regions over the next two years, and then rolled out nationally by 2018

Officials said that would pave the way for drawing up a national negative list for foreign investors, which will be formulated on the basis of bilateral negotiations. They didn't elaborate to what extent it will overlap with the existing one in the four pilot regions.

China and the United States agreed in 2013 to enter substantive negotiations for the Bilateral Investment Treaty based on the basis of pre-establishment of national treatment and negative lists.

Assistant Minister of Commerce Tong Daochi said a treaty between the two countries is its top priority in terms of economic cooperation. He said China will formulate that national negative list for foreign investors based on the negotiations between the two countries.

More than 3,900 foreign-funded companies had been set up in Shanghai, Guangdong, Tianjin and Fujian by the end August, according to the ministry, and they had conducted business worth 293.7 billion yuan ($46.4 billion).