China plans to introduce seven more pilot free trade zones (FTZs), including five in inland provinces, but foreign investors are urging the central government to expand the currently restricted market access and remove uncertainties brought about by a national security review of foreign investments.
Commerce Minister Gao Hucheng told state media on August 31 that the new FTZs would be in northeast China’s Liaoning province, east China’s Zhejiang province, west China’s Shaanxi and Sichuan provinces, the city of Chongqing, and central China’s Henan province.
It is the first time that inland regions have been included in the list of FTZs.
Gao said the FTZs, larger in area and covering a wider range of industries, would have their own characteristics and help deepen economic reforms.
The size and scope of the new FTZs and specific policies to facilitate their development have yet to be announced. On September 3, the Ministry of Commerce issued a set of draft rules regulating foreign investment in China, whereby the registration process for foreign investment would be simplified and a revised “negative list” would be rolled out nationwide from October 1, identifying industries that are closed to overseas investors.
The negative list was introduced in late 2013 after the mainland’s first FTZ was opened in Shanghai, and was revised in 2014 and 2015. In the revised version applicable to the existing four FTZs including Shanghai, Guangdong, Fujian and Tianjin, online gambling operations, petroleum stations and property development are open to foreign investors.
The latest negative list, introduced by the state council in April 2015, includes 15 industries that are completely or partially off limits to foreign investors, including financial services, mining, telecommunications, online news services, medical services, culture and entertainment.
In a written reply to questions from the South China Morning Post, the European Chamber of Commerce said its 2016 Business Confidence Survey shows that China’s pilot FTZs “have not lived up to their full potential,” highlighting the fact that financial services was one of the banned sectors that was of greatest interest among its members.
Chinese authorities claim they have trimmed the negative list two times and that the version introduced in April last year includes 122 categories closed to foreign investors, down from 190 categories in the 2014 list.
But the European chamber said that rather than genuine trimming, “it is apparent that many industries and sectors have merely been regrouped” in the negative list.
