China Briefing identifies the notable policy changes in Beijing’s Three-Year Action Plan for its service sector, which aims to create wider opportunities for foreign investment.
Key sectors that will be liberalized include value-added telecommunications and internet business, finance, healthcare, and professional services.
On August 15, Beijing Municipal Commerce Bureau unveiled a Three-Year Action Plan to further open the city’s service industry for foreign investment.
The action plan consists of eight documents, respectively covering eight subsectors – science and technology, internet information, finance, education, culture and tourism, healthcare, and professional services.
Each document instructs the relevant government departments to conduct pilot measures in the respective sector to open additional markets to foreign investors within a specified period.
Key sectors opening up in Beijing
We identify key areas where foreign investment was previously prohibited or restricted but is now permitted in Beijing.
Science and technology
The Three-Year Action Plan for science and technology (S&T) proposes to accelerate the clustering of high-end S&T resources, strengthen the international S&T cooperation and exchange, and shape a more open innovation environment in Beijing.
A total of 20 measures include expanding fast track channels for foreign talents to apply for visa and start business, setting up new S&T awards for foreign talents, launch new international cooperation projects, and more.
The plan for internet information sector contains 16 measures to open value-added telecommunications and internet business for foreign investors.
Notably, restrictions on foreign ownership of internet data center (IDC) business, internet resource collaboration services (public cloud), and application stores will be relaxed by December 2019.
Also by December 2019, foreign investors will be allowed to invest in virtual private network (VPN) services, which allows domestic users to bypass China’s firewall to access foreign internet services.
With no more than 50 percent of foreign ownership, foreign investors can cooperate with Chinese partners and provide VPN services in trial zones.
Culture, entertainment, and tourism
By October 2019, Beijing will allow the establishment of wholly foreign-owned (WFOE) entertainment venues and performance agencies for nationwide operations.
Foreign investors can invest in audio visual production in certain industrial zones and parks in Beijing if they are in partnership with domestic investors. Moreover, the domestic party must lead the operation and have the right to censor content produced.
By December 2021, wholly foreign-owned travel agencies in Beijing will be permitted to operate outbound travel services (excluding Taiwan) for Chinese citizens. Departure tax rebates and 144 hours transit visa exemption measures will be further refined.
The financial sector will see the greatest impact under the new measures to widen market access.
38 measures have been proposed and are expected to ease market access for financial institutions as well as promote the cross-border use of RMB, internationalization of financial services, and improvement of the financial security and stability environment.
A total of 30 measures will further open the medical and elderly care sectors for foreign investment and promote international medical services and innovations.
By the end of 2019, the government will lower barriers to market entry for elderly care institutions funded by foreign charitable donation and complete several hospital projects with foreign cooperation in Beijing.
Professional services and business services
The plan promises to lower entry barriers, promote mutual recognition of qualifications, and build global professional service networks in fields like accounting, management consulting, dispute resolution, intellectual property, and architectural design.
In terms of construction services, wholly foreign-owned construction companies are permitted to undertake Sino-foreign joint construction projects, including Beijing municipal sub-center area and Beijing Daxing international airport Linkong economic zone.
Beijing continues to widen service sector opening
The Three-Year Action Plan with a total of 190 measures is consistent with a series of polices previously approved by China’s State Council to bolster Beijing’s service sector, which include:
- The Approval on Promoting the Comprehensive Pilot Plan of Expanding the Opening up of Beijing’s Service Industry (Guo Han  No.16) in January 2019;
- The Pilot Plan of Deepening Reform of Advancing Opening up of Beijing’s Service Industry (Guo Han  No.86) in June 2017; and
- The General Plan of Expanding Opening up of Beijing’s Service Industry (Guo Han  No.81) in May 2015.
The government’s overall goal is to strengthen Beijing’s role as the political, cultural, international exchanges, and S&T innovation center and to take the negative list system as the guide to build a comprehensive opening zones testing various pilot policies in Beijing. Successful trail policies in service sector will be promoted across the country.
Recently, the Beijing government released official data showing the success of the previous opening up policies for service sector.
- In the first half of 2019, the added value of Beijing’s service sector accounted for 82.8 percent of its total GDP, 4.9 percent higher than in 2014.
- The city’s actual use of foreign capital of US$8.59 in the first half of 2019 equaled to the whole year’s actual use of foreign capital in 2014.
- In 2018, Beijing’s service trade import and export showed an annual growth of 10 percent – making up one-fifth of the whole country’s service trade import and exports.
While the Three-Year Action Plan for each sector covers various aspects of opening up, it does not give implementation details.
Businesses looking to enter related sectors are advised to stay abreast of implementation solutions from relevant government bureaus and authorities, or to seek help from local experts.
China Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Dalian, Beijing, Shanghai, Guangzhou, Shenzhen, and Hong Kong. Readers may write to email@example.com for more support on doing business in China.