(Yicai Global) Dec. 25 -- China's National Development and Reform Commission and Ministry of Commerce jointly issued the 2018 Special Administrative Measures on Access to Foreign Investment, also known as the 'negative list.' 

The latest version of the negative list marks the full implementation of the foreign investment regulatory system where industries and sectors left off the list are legally open to all types of market players.

The major institutional innovation will help the market play its decisive role in resource allocation and truly achieves the principle of "anything not prohibited is fair game."

The innovation will stimulate the vitality of market players, treat them equally in rules, rights and opportunities.

It will help government to enhance its supervision during and after economic activities.

The policy change will also promote reform of the review and approval system, investment system, supervision mechanism, social credit system and incentive and punishment mechanism, and advance the modernization of the national governance system and its capacity, Xinhua News Agency reported today, citing a spokesperson for the NDRC.

The list falls under two major categories of prohibited and allowed, consisting of 151 items and 581 specific management measures. The number of items decreases by 177 and specific measures by 288 compared with the previous version.

The Four No-Nos

The four categories of prohibitions comprise, those contained in laws and regulations relevant to foreign investment access; investment and projects that are forbidden in the Foreign Investment Industry Guidance Catalog which preceded the negative list; illegal finance-related business activities; and illegal internet-related business activities. 

Market players are not allowed to access these banned items. Administrative agencies will not grant approvals for such activities.

The third and fourth items target ever-changing technologies, products, business models in the financial and internet sectors. These two items are to prevent major risks in the sectors. Policy makers and industry authorities jointly reviewed the current management measures and submitted them to China's cabinet, the State Counci,l for approval before issuance.

The 147 items with permitted access involve 128 provisions covering 18 sectors in 20 categories of the national economy. Manufacturing has 26 provisions, transportation, warehousing and postal services contribute 12, while 11 are in the wholesale and retail trades, 11 in the financial sector, and 11 in the cultural, sports and entertainment sectors. 

Market subjects must apply for approval from administrative agencies or enter the market per government-mandated rules.

China formulated its draft negative list in March 2016, which it then piloted in the cities of Tianjin and Shanghai, and in Fujian and Guangdong provinces.  The pilot expanded to 15 provinces and cities last year. The 2018 edition was formulated based on this pilot experience.

Editor: Ben Armour