We highlight new opportunities in China’s draft “2022 Catalogue of Encouraged Industries for Foreign Investment”, which contains 1,435 items. These align with China’s plans to attract foreign investments into high-tech manufacturing, production-oriented service industries, as well as regional advanced industries in the central, western, and northeastern regions. Opportunities also exist in industries linked to green, healthcare, elder care, sports, and vocational education sectors besides rural revitalization.
On May 10, 2022, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) released the Catalogue of Encouraged Industries for Foreign Investment (Edition 2022) (Exposure Draft) (hereafter the “2022 FI Encouraged Catalogue (Exposure Draft)”) to gather public opinions until June 10, 2022.
Once enacted, the 2022 FI Encouraged Catalogue will replace its 2020 version.
Similar to the previous version, the 2022 FI Encouraged Catalogue (Exposure Draft) includes two sub-catalogues – one covers the entire country (“national catalogue”) and one covers the central, western, and northeastern regions (“regional catalogue”). Together, the 2022 FI encouraged catalogue (Exposure Draft) identifies industries where foreign direct investment (FDI) will be welcome and treated with favorable policies in China.
The newly released 2022 FI Encouraged Catalogue (Exposure Draft) contains a total of 1,435 items, increased by 16 percent from 1,235 items in the previous version. The lengthening of the catalogue signifies that more investment fields will favor foreign investors.
To break this down: the 2022 FI Encouraged Catalogue (Exposure Draft) has added 238 items, modified 114 items (mainly expanding the area covered by the original entry), and removed 38 items. In the national catalogue, 50 new items have been added, 62 items modified, and 14 items removed while 188 new items added, 52 items modified, and 24 items have been removed in the regional catalogue.
Considering the additions to the regional catalogue accounts for 79 percent of all new entries, the 2022 FI Encouraged Catalogue (Exposure Draft) aims to attract greater foreign investment into China’s less developed central, western, and northeastern regions.
According to the official interpretation, the revision of the 2022 FI Encouraged Catalogue (Exposure Draft) is intended to continuously lure foreign investment in three main areas:
Nationwide, the catalogue has added or expanded items on manufacturing of components and parts and equipment. In the service industries, foreign companies are encouraged to invest in production-oriented services, with items, such as professional design, technical services, and development, newly added to the national catalogue.
The regional catalogue has added or expanded relevant items catering to the specific advantages of China’s central, western, and northeastern regions, such as labor force availability, distinctive resources, and need for investment.
Taking a closer look, the revision to the encouraged catalogue is also in line with China’s priorities on further improving the country’s healthcare system, sports industry, elder care, rural revitalization, vocational education, and the transition to a green, low-carbon, and circular economy.
We briefly highlight some of the investment opportunities in the promoted industries below. Businesses should seek professional support to understand the full extent of the opportunities available and potential access to incentives that may streamline costs and offer market benefits.
The 2022 FI Encouraged Catalogue (Exposure Draft) adds multiple new items for the healthcare sector. Some areas where foreign investment is encouraged are:
Inspired by the success of the Beijing Winter Olympic Games, the 2022 FI Encouraged Catalogue (Exposure Draft) encourages foreign investment into China’s snow and ice industry, with “research and development and production of snow and ice heavy equipment and light equipment for ski resort, passenger ropeway, snow machine, snow press, and other special equipment” being added to the encouraged catalogue.
The 2022 FI Encouraged Catalogue (Exposure Draft) also added “construction, operation, and management of fitness facilities such as outdoor sports camps” and “development, popularization, and promotion of intelligent sports products and services” as encouraged items for foreign investment.
To facilitate the development of the elder care sector, the 2022 FI Encouraged Catalogue (Exposure Draft) encourages foreign investment in “research, development and manufacturing of smart healthcare products for the elderly”, which include geriatric products and auxiliary products manufacturing, geriatric medical equipment and rehabilitation AIDS manufacturing, elderly intelligent and wearable equipment manufacturing.
Moreover, foreign investment is also encouraged for elder care related services, including services for renovation and barrier-free transformation of home, livable environment, and public facilities for the elderly, training services designed for elder care, and education and human resources services provided to the elderly.
The 2022 FI Encouraged Catalogue (Exposure Draft) adds multiple items that are designed to improve the agriculture, living environment, logistic, commerce, and industrial structure of the rural area. Among others, the below items are introduced in the encouraged catalogue:
To echo China’s plan to strengthen the country’s vocational education system, in addition to the Vocational Education Law that came into force recently on May 1, 2022, the 2022 FI Encouraged Catalogue (Exposure Draft) adds “non-academic art vocational training institutions”.
To be noted, this does not include “non-disciplinary culture and art out-of-school training institutions”, which are still subject to stringent supervision amid China’s effort to reduce burden for students and parents.
On top of the nearly 100 items that are relevant to China’s green transition in the 2020 FI Encouraged Catalogue, the 2022 FI Encouraged Catalogue (Exposure Draft) introduces more, such as:
So far, the following favorable treatment is in place for foreign-invested enterprises (FIEs) engaged in doing business in the listed industries published in the encouraged catalogue:
China’s strict curbs implemented to prevent and control the COVID-19 pandemic, especially lockdowns and restrictions on movements has seriously hampered the national economic growth in 2022, together with an uncertain international environment caused by the Russian-Ukraine conflict, geopolitical confrontation among the superpowers, shrinking overseas demand, and continued supply chain bottlenecks.
Given that FIEs account for about a quarter of China’s industrial output, a fifth of its tax revenue, and about 40 percent of its total imports and exports – stabilizing foreign investment and optimizing the distribution of foreign capital is a top priority for the government and policymakers.
The shortening of the FI negative lists as well as the lengthening of the FI encouraged catalogue marks further opening-up and friendliness of Chinese markets to foreign investors, as promised by the country’s government.
On the other hand, analysts hold that the further relaxation of foreign investment access alone is not enough to boost FDI. Officials will need to substantially loosen COVID-related restrictions and implement more concrete stimulus measures, among others, to restore business confidence in China.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org.
Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.
Previous Article « New Specifications for Cross-Border Processing of Personal Information for MNCs
Next Article China Annual IIT Reconciliation – Your Tax Refund FAQs Answered »
Dezan Shira & Associates´ brochure offers a comprehensive overview of the services provided by the firm. With...
A firm understanding of China’s laws and regulations related to human resources and payroll management is ab...
Doing Business in China 2022 is designed to introduce the fundamentals of investing in China. Compiled by the ...
With the scope and penalties of China’s social credit system being further clarified in 2021, legal and regu...
As a legitimate tool for reasonable tax planning and cost saving, tax incentives play an important role. Compa...
Over the last few months, China has been quickly expanding the pilot program on electronic special value-added...
Dezan Shira & Associates helps
businesses establish, maintain,
and grow their operations.
Stay Ahead of the curve in Emerging Asia. Our subscription service offers regular regulatory updates,
including the most recent legal, tax and accounting changes that affect your business.