An interpretation of the Special Administrative Measures for Foreign Investment Access (Negative List) (2021)

Wednesday 22 June 2022

Vivian Su

Shanghai Rewin, Xuhui, Shanghai


Daisy Guo

Shanghai Rewin, Xuhui, Shanghai


The National Development and Reform Commission and the Ministry of Commerce issued Special Administrative Measures for Foreign Investment Access (Negative List)(2021 version)[1] (Negative List) on 27 December 2021, with the CPC Central Committee’s and the State Council’s consent. The Measures became effective from 1 January 2022, when the Special Administrative Measures for Foreign Investment Access (Negative List) (2020 version) was abolished.

From the recent revisions to the Negative List, it is clear the List has been shortened for five consecutive years, access to foreign investment has been relaxed, and the pace of opening-up further expanded. The overall direction of this 2021 revision is to further improve the level of opening-up and promote the liberalisation and facilitation of foreign investment.

Main principles of the revision

The main principles of the revision are to:

  1. balance development and security, further expand opening-up, and appropriate between the intensity of opening-up, national security and regulatory capacity;
  2. draw lessons from international prevailing rules – areas in which risks can be prevented and controlled through foreign investment security review and the unified management measures of domestic and foreign investment will not be included in the Negative List;
  3. give full play to the role of pilot free trade zones as testing grounds for reform and opening up, and continue to expand opening-up on a trial basis; and
  4. safeguard national security.

The restrictions on access to foreign investment will continue to be maintained in sensitive areas involving national political security and ideological security.

The importance of the further reduction in the Negative List

The year 2021 marked the start of the 14th Five-Year Plan and the 20th anniversary of China’s accession to the World Trade Organization. It is an important measure for China to expand high-profile opening-up and promote high-quality economic development. It is also a positive action for China to share development opportunities with the rest of the world and promote economic globalisation development on a more open, inclusive, all-beneficial, balanced and ‘win-win’ orientation.

Highlights of the 2021 revision

By comparing the 2021 Negative List with the previous version, it can be seen that the List has been further reduced to 31 items, representing a reduction of just over six per cent. The highlights are:

To expand the opening-up of manufacturing

In the area of car manufacturing, restrictions on foreign ownership in passenger car manufacturing and restrictions on the establishment of two or fewer joint ventures in China for the production of the same vehicle products have been abolished.

In radio and television equipment manufacturing, restrictions on foreign investment in the production of ground-receiving facilities and key components for satellite TV and radio broadcasting are abolished. It is to be managed in accordance with the principle of uniformity between domestic and foreign investment.

To improve the Negative List’s accuracy

The explanatory part of the Negative List has responded to problems with overseas listing of enterprises engaging in businesses prohibited from foreign investment: provided that a domestic enterprise engaging in businesses prohibited from investment in the Negative List issues shares abroad and trades them on the stock market, it shall obtain approval from the relevant competent state authorities. This refers to the approval that domestic enterprises’ overseas listing is not subject to the prohibition of the Negative List, rather than the approval of the activities of domestic enterprises' overseas listing itself. Foreign investors shall not participate in the operation and management of the enterprise, and their shareholding ratio shall be governed by reference to the relevant provisions on the management of domestic securities investment by foreign investors.

Scientific supervision remains and includes banning foreign investors from participating in the operation and management of such enterprises, limiting their shareholding ratio, etc. This is to provide policy space for domestic enterprises engaged in businesses prohibited from the Negative List to go public overseas, to meet diversified financing needs, and to broaden investment channels for foreign investors.

To optimise management of the Negative List

According to the Implementation Regulations of Foreign Investment Law, improving the List’s management will take place by: (1) adding ‘Foreign-Invested enterprises investing within Chinese territory should comply with the relevant provisions of the Negative List for foreign investment access’; and (2) linking the Negative List for foreign investment to the negative list for market access, and adding the relevant regulations on ‘unified application of the negative list for market access for both domestic and foreign investors’.


Through some public announcements issued by the National Development and Reform Commission, the Ministry of Commerce and other relevant departments, we learn that the relevant departments will not only implement the Negative List, but also manage the industries and areas beyond the Negative List in accordance with the principle of consistency between domestic and foreign investment. This is to give foreign-invested enterprises national treatment, to increase further opening-up to the outside world, to promote free competition, and to play the role of the market’s ‘invisible hand’. In order to realise the international and domestic ‘double cycle’, the Negative List balances the strategic requirements for the independent development of some national industries with the actual needs of private enterprises for financing expansion, development and operation, as well as reflecting the requirement of coordinated development. At the same time, it safeguards China’s national security while opening-up wider to the outside world.


[1] State Council, The Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Edition), http://www.gov.cn/zhengce/zhengceku/2021-12/28/content_5664886.htm accessed 17 June 2022.