China releases nationwide ‘negative list’ in show of openness, but will it make any difference?

Beijing on Tuesday sought to demonstrate its willingness to open up its markets with the publication of its first unified “negative list” of the business sectors that are off limits to foreign, and in some cases domestic, investors.

China’s top economic planning agency, the National Development and Reform Commission (NDRC), which compiled the document in cooperation with the Ministry of Commerce, said it applied across the mainland and overrode all related local government regulations.

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The list comes as Beijing is facing an uphill battle to maintain economic growth amid its trade war with the United States and growing concerns among domestic private sector businesses that the Communist Party is leaving them to flounder in favour of propping up the state sector.

“The promulgation of the negative list nationwide means that China has set up a unified, fair and rule-based system for market access,” said Xu Shanchang, director of the NDRC’s economics system reform department. “From now on, other government agencies and local governments are barred from making rules about market entry.”

Ding Haifeng, a consultant with Shanghai Integrity Financial Consulting, said the publication of the list was indicative of Beijing’s commitment to relaxing market access, even if it was only limited in scope at this stage.

“The list is of only symbolic value as [China’s] key sectors are still off limits to non-state-owned or foreign investors,” he said. “But it’s a crystal clear message that wider market access for both foreign and privately owned businesses is in the works and that they will be given opportunities in some areas, such as manufacturing.”

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The document released on Tuesday differs from the negative list published in June in that it applies to all companies doing businesses in China, not just foreign enterprises.

Beijing released its first ever negative list in 2016 under a pilot scheme in just four province-level jurisdictions regions, namely Shanghai, Guangdong, Tianjin and Fujian.

The new list comprises 151 areas that are either off limits to non-state businesses or that require them to go through an application and approval process.

Much of it is unchanged from earlier lists on sectors closed to private and foreign firms, such as the processing and distribution of edible salt.

In other sectors, such as vehicle manufacturing and finance, the involvement of foreign businesses remains subject to a lengthy and convoluted approval process, although Beijing did recently raise the cap on how much of a joint venture – with a local partner – a foreign investor can now own.

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Chinese President Xi Jinping said in Shanghai last month that Beijing continued to support globalisation and pledged to provide easier access to China’s markets for foreign firms.

But business lobby groups, including the European Union Chamber of Commerce, said Beijing’s promises were not enough to convince foreign companies that China’s markets were fair and transparent.

China sought to show its openness to global investors as early as 2013 when it allowed Shanghai to set up the country’s first free-trade zone. But the move failed to attract foreign funds because of tight restrictions and a rigid approval processes.