The most recent version of the Guidance Catalogue for Foreign Investment Industries (the Catalogue) came into effect on 1 December 2007. Foreign investors in China are required to comply with the restriction on shareholding interest in different industries, as outlined in the Catalogue.
The new Catalogue aims to direct foreign capital towards helping China upgrade its industrial structure and improve unsound aspects of its economic growth. A key area of focus of the new Catalogue is resource conservation and environmental protection.
In particular, it reflects the Chinese Government's determination to
- eliminate "backward" production techniques and capacity
- realise energy-saving and emissions reduction
- synchronise foreign investment with improvements to China's domestic industrial structure
- encourage foreign investment in recycling, clean production techniques, renewable energies and environmental protection methods.
The new Catalogue also aims to strictly limit market access to heavy-polluting industries that involve high energy consumption.
Foreign investment is no longer encouraged in projects involving important and scarce mineral resources or non-renewable energy production, such as the mining and sifting of low-grade metallurgical ores.
The production and supply of electricity, gas and water is now off-limits to foreign investors.
Exploration for, and mining of, tungsten, tin, antimony, molybdenum, fluorspar, and the smelting of electrolytic aluminium, copper, lead, zinc, tungsten, molybdenum, stannum (stannum compound excluded), antimony (including antimony oxide, sulfurated antimony) and other rare metals have been removed from the "restricted" category and placed in the "prohibited" category.
In respect of small-scale power grids in Tibet, Xinjiang and Hainan the construction and operation of condensing steam coal-fired power stations with a single unit capacity of 300,000 kW or less and coal-fired heat and electricity cogeneration power stations with extracting and condensing steam turbine units, of which the single unit capacity is 100,000 kW or less, was previously "permitted" but is now "restricted".
With the exception of small-scale power grids in Tibet, Xinjiang and Hainan, such construction and operational activities are now "prohibited" (they were previously "permitted").
The utilisation of mine gas; the development of new technology for increasing the utilisation rate of mine gangue and the application of technology for recovering mine ecology; the exploration for, and exploitation of, non-conventional oil resources, such as oil shale, oil sand, heavy oils and extra heavy oils, were all previously "permitted", are now explicitly "encouraged". However in most cases foreign investment must take the form of a joint venture with a Chinese party.
Apart from the Catalogue, in the near future the Chinese Government is expected to set and apply standards for energy consumption, environmental protection and safety, resource recovery and quality control in respect of applicable technologies and project construction.
Andrew Halper, Head of the China Business Group at Eversheds commented on the changes to the Catalogue: "This is a typically macroeconomic move by the Chinese Government, designed to accelerate the development of efficient usage of energy resources in China."
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