China pledges to increase openness with foreign investment rules

By By Michael Martina Features Reuters

Chinese flag waves in front of the Great Hall of the People in Beijing, China, October 29, 2015. REUTERS/Jason Lee (Copyright Reuters 2016)

China moved towards opening up markets such as railway equipment and vehicle batteries on Wednesday with the publication of draft foreign investment guidelines which it said would "increase openness to the outside world".

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Beijing is facing mounting criticism from foreign governments over its closed markets. Despite repeated pledges to increase access for foreign firms, critics say it has not followed through on its reform agenda.

They also say new regulations are restricting market access even further, leading to increased pessimism about China's business environment within the foreign business community.

China's Ministry of Commerce and state planner the National Development and Reform Commission issued the draft rules, which cut the number of sectors on several restricted and prohibited lists from 93 to 62.

Although the guidelines are not finalised, and the extent of the reforms remain unclear, the revised lists include openings in manufacturing sectors such as rail transportation equipment, automotive electronics and new energy vehicle batteries, edible fats and oils, corn processing, and fuel ethanol.

The agencies provided few details but said China was also making further openings in service sectors such as passenger transport and credit investigation and rating services.

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Restrictions in critical banking and securities sectors remained largely unchanged, according to the lists, though a reference to 49 percent foreign investment caps on some types of securities companies appeared to have been removed.

Gambling and pornography, which are banned in China, were removed from the prohibited list because prohibitions are applied equally to both domestic and foreign investments.

The American Chamber of Commerce in China welcomed the revised lists, which have been released for public comment, and told its members the move "appears to represent additional efforts to further streamline the ongoing reform efforts."

The United States has been negotiating a bilateral investment treaty with China, but the two countries have not reached agreement on a reduced list of off-limit sectors.

Germany and China have been involved in an increasingly public dispute about access to each others' markets, with China complaining about unfair scrutiny of its acquisition targets in Germany, and Germany wanting a more level playing-field for its firms in the world's second-largest economy.

(Editing by Alexander Smith)