China’s economic transformation and growth over the past few decades have been significantly driven by country’s commitment to opening up its economy to foreign investment.
One crucial element of this approach has been the reduction of negative lists for foreign investment, which has played a pivotal role in facilitating international business activities in the country. Since the introduction of the negative list approach in China’s pilot free trade zone in Shanghai in 2013, substantial progress has been made in reducing restrictions across various sectors.
The evolution of China’s negative lists
The concept of negative lists in China’s investment landscape was relatively new a decade ago. In 2013, China’s inaugural pilot free trade zone in Shanghai became the testing ground for this innovative approach. At that time, the negative list approach aimed to identify and restrict specific industries and sectors where foreign investment was prohibited or subject to limitations. Yang Zhengwei, the head of the Ministry of Commerce’s department of pilot FTZs and free trade ports, highlights the significance of these pilot FTZs in trialing this approach.
Over the years, these pilot FTZs have played a crucial role in fine-tuning and expanding the negative list concept. One of the most notable achievements has been the reduction of negative lists by more than 80 percent since 2013. This remarkable reduction reflects China’s commitment to opening up its economy and welcoming foreign investments.
Sectors affected and cleared
The impact of the reduced negative lists has been most evident in the agriculture and manufacturing sectors. In agriculture, the only remaining restriction applies to the seed sector. In contrast, the manufacturing sector within FTZs has seen a complete clearance of negative lists, allowing foreign investors to participate freely. This move has significantly improved the ease of doing business in China for manufacturing companies.
Furthermore, the services sector has experienced a paradigm shift. China is now encouraging more foreign-controlled or wholly foreign-owned businesses in this sector. This move is fostering innovation, competition, and a more dynamic market environment in the services industry, attracting multinational corporations and driving economic growth.
The nationwide promotion of negative lists for foreign investment access in 2017 marked a critical milestone in China’s economic development journey. This promotion symbolized an accelerated pace of opening up to the global market. China’s commitment to reducing barriers and restrictions has signaled its determination to become a more attractive destination for foreign investments.
Expanding free trade zones
China’s progress in reducing negative lists has gone hand in hand with the establishment of more free trade zones. Presently, China boasts 21 FTZs and the Hainan Free Trade Port. These free trade zones are instrumental in driving international trade and investment, accounting for nearly 18 percent of the country’s total imports and exports in 2022. Their role in promoting economic development and trade cannot be overstated.