The V&T Legal Newsflash (Newsflash) is hosted and contributed by the International Practice Committee of the V&T Law Firm. The purpose of the Newsflash is, on a timely fashion, to continuously provide our international clients with highlights of the most recent laws and regulations. The Newsflash will timely introduce and closely track the international laws, which relate to cross-border transactions, international investments and financing, and other hot international legal issues. The Newsflash will be updated on a two-month basis.
China’s Draft Investment Catalouge for Encouraging Foreign Investors
On July 31, 2020, China’s National Development and Reform Commission and the Ministry of Commerce ruled out an exposure draft of the 2020 edition of the Catalogue of Encouraged Industries for Foreign Investment (“Draft 2020 Catalogue”，《鼓励外商投资产业目录（2020年版）（征求意见稿）》) to seek public opinion. The Draft 2020 Catalogue includes two sets of list: one is for the entire nation (“National List”) and the other is for central, western, and northeastern regions (“Regional List”). Compared with the 2019 edition, the proposed The list in the Draft 2020 Catalogue has been lengthened and the scope is extended: 125 new industries were added and 76 previously listed industries were amended. The National List, which now contains 471 encouraged industries, has added 56 encouraged items and adjusted 40 items. The Regional List has added 69 items and amended 36. It is expected that the finalized 2020 Catalogue would offer a guidance to foreign investors and would be tremendously meaningful for the promotion of foreign investment in China.
Please refer to the following link for full text of the Draft 2020 Catalogue in Chinese:
Chinese Version: http://www.gov.cn/zhengce/zhengceku/2020-12/28/content_5574265.htm
China Further Encourages High-quality Industries for Foreign Investment
On December 28, 2020, China’s National Development and Reform Commission and Ministry of Commerce jointly issued the Catalogue of Encouraged Industries for Foreign Investment (“2020 Catalogue”, 《鼓励外商投资产业目录（2020年版）》), which will take effect on January 27, 2021. The 2020 Catalogue has laid out the principal legal foundation for foreign investors to enjoy preferential treatment for certain designated industries (“2020 Preferential Treatment”). The 2020 Preferential Treatment includes conditional exemption from duties, reduction of corporate income tax and other incentives that could nurture the foreign investments in China. Compared with the Draft 2020 Catalogue which was released for public opinion in July, the 2020 Catalogue has been finalized with following changes: The list for the entire nation, which now contains has newly added 9 encouraged items and revised11 items. The list for central, western, and northeastern regions of China has amended one. In comparison with the 2019 edition, the finalized 2020 Catalogue expanded the scope of foreign investor who is eligible for the 2020 Preferential Treatment, provided that such foreign investor is in advanced manufacturing industry, modern service industry as well as the advantageous industries in the central and western regions of China. Not only is the 2020 Catalogue tremendously meaningful for the introduction and promotion of foreign investment in China, but it offers practical guidance to foreign investors.
Please refer to the following link for full text of the 2020 Catalogue in Chinese:
Chinese Version: http://www.gov.cn/zhengce/zhengceku/2020-12/28/content_5574265.htm
China Releases 2020 Negative List for Market Access
On December 16, the National Development and Reform Commission and the Ministry of Commerce released the 2020 Market Access Negative List (“2020 List”, 《外商投资准入特别管理措施（负面清单）（2020年版）》). Compared with the 2019 edition, the 2020 List has been shortened to 123 items – relaxing requirements in oil and gas exploration and production, inspection services for exported and imported goods, services assessing forest and mineral resources and carbon emissions, and appointment on new executives in securities companies. Items newly added to the 2020 List this year, include the establishment of financial holding companies and the large-scale transfers of land management rights.
Please refer to the following link for full text of the 2020 List in Chinese:
Chinese Version: http://www.gov.cn/gongbao/content/2020/content_5532623.htm
China Further Strengthens National Security Review of Foreign Investment
On December 19, 2020, China’s National Development and Reform Commission (“NDRC”) and Ministry of Commerce jointly issued the Measures for the Security Review of Foreign Investment (“Measures”, 《外商投资安全审查办法》), which will take effect on January 18, 2021. The Measures intend to provide a clearer legal basis and procedure for strengthening the national security review of foreign investment into China. The Measures would have far-reaching effects on foreign investors who plan to make investments in China. In this sense, foreign investments by means of nominal shareholders, trust, multiple-layer investments, lease, loan, variable interest entities, or even some of offshore transactions would fall within the scope of the Measures. It is a big trend in recent years that the Chinese government has tried to tighten its regulations by enforcing greater scrutiny to foreign investors. Please refer to the following link for full text of the Measures in English and Chinese:
English Version: https://www.lawinfochina.com/display.aspx?lib=law&id=34385
Chinese Verson: https://www.ndrc.gov.cn/xxgk/zcfb/fzggwl/202012/P020201219582032130362.pdf
Incorporation Documentation Rules in Shanghai has been Relaxed
In Shanghai, the procedures and the required documentation for incorporating a company have been relaxed in order to assist new Chinese market-entrants. From January 1, 2021, Shanghai Administration for Market Regulation (“AMR”) has started to loosen the requirement of authenticating several key documents, which used to be mandatorily required by the Chinese Embassies for foreign countries. Previously, Certification of Incorporation and Detailed List of Company Information, Investor’s identification and Resolution and Power of Attorney (“Incorporation Documents”) are required to obtain the business license for company incorporation, which need both notarization and a certification of authentication from the Chinese Embassy in the investor’s home country. However, the travel ban prohibits the entry of foreigners, which bars many investors from entering China in person. As well as the prolonged closures of Chinese Embassy in many countries poses considerable challenges to the foreign investments.
To address these concerns and to promote foreign investment in China, AMR in Shanghai relaxes the authentication requirements for the Incorporation Documents. For individuals or companies who wish to avail of this waiver, they shall submit a commitment letter, signed by the investors, demonstrating that they are willing to provide the necessary legalized documents in compliance with Chinese laws and regulations, once it is made possible. Foreign investors may quickly benefit from that. Foreign investors contemplating their entry into the Chinese market in 2021 can also be comforted by the trend of business-encouraging policies that has been gradually introducing to the public.
China Issues Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures
On January 9, 2021, China issues Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures (“Rules”, 《阻断外国法律与措施不当域外适用办法》) to stop unjustified use of foreign laws. The Rules establishes a working mechanism to assess the legal implications under the circumstances that a Chinese person or organization is restricted by foreign legislation from engaging in normal economic activities with a foreign government or its citizen. The Chinese person or organization may report it to the Ministry of Commerce of PRC (“MOC”) within 30 days, according to Article 5. The MOC will then assess a case for its potential violation of international law, and its impact on China’s sovereignty and national security. Please refer to the following link for full text of the Rules in English and Chinese:
English Version: http://lawinfochina.com/display.aspx?lib=law&id=34489
Chinese Version: http://www.mofcom.gov.cn/article/i/jyjl/e/202101/20210103032421.shtml
Editor: Lyon Dong
Associate Editor: Cyrus Cao