China Pledges to Treat State, Private and Foreign Firms Equally

(Bloomberg) -- China released new rules promising to treat all firms equally from a regulatory standpoint, whether they are foreign, private Chinese companies or state-owned enterprises.

The new rules, which go into effect immediately, contain a "negative list" of four banned types of business, and a further 147 categories where government permits are needed. For all sectors not on these lists, all companies can "enter equally," according to the document published by the National Development and Reform Commission and the Ministry of Commerce on Tuesday.

The domination of China’s economy by state-owned companies has been criticized both at home and abroad, and is one of the issues raised by the U.S. in the current trade dispute. The changes, if implemented as described, would break down barriers protecting SOEs from domestic and foreign competition, and will also help businesses by clarifying the areas the government will regulate.

Still, foreign investors face another negative list which only applies to them. That details ownership caps for overseas investors in certain industries, and specific sectors where they are restricted or banned. China shortened that list in June, and may continue trimming it next year, according to the state-run Xinhua News Agency.

China Pledges to Further Improve Market Access by March 2019

China has been trialling this approach since 2015, and the list announced on Tuesday is shorter than the trial version, which was tested in a few cities and provinces, NDRC official Xu Shanchang told reporters.

While more areas are open, the most sought-after industries, such as the financial and Internet sectors, are still on the list and thus subject to government control.

  • The list includes four categories that are banned for all companies, including those sectors that are illegal and those which will be eliminated due to industrial restructuring. It also specifies that non-financial institutions are not allowed to register as "bank," "insurer," "trust company," "bourse," or other finance-related entities, and bans some types of Internet-related businesses, including illegal online fundraising and spreading information about "hazardous materials."
  • The list has 10 main regulated sectors, ranging from agriculture to manufacturing and catering. Based on the number of sub-categories, the most heavily regulated are manufacturing, transportation and finance.

©2018 Bloomberg L.P.