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The Government's main initiatives in recent years to promote manufacturing in China included the adoption of the "China Manufacturing 2025" plan, which was issued in May 2015. In order to implement the plan, China intends to set up pilot projects in cities as well as "national demonstration zones". (...) Various sector-specific policies were introduced to promote the development of, for example, new energy vehicles, (...)

The authorities are cognizant of these risks, and are focusing on the quality and sustainability of growth rather than its quantity with a view to encouraging innovation-driven, harmonized, green, open, and inclusive development. China continues to be in a transition to a more sustainable development path and reforms have advanced across many areas, including the introduction of measures to reduce overcapacity (...)

Other fiscal measures adopted during the review period pertaining to supply-side reform and economic restructuring have included: (…) the development of more measures to support environmental protection, energy conservation and emissions reduction. (…)

(…) There appears to be overcapacity in at least ten sectors including coal, steel, cement, plated glass, aluminium, chemicals, paper, solar power, shipbuilding, and coal fuelled power. (…) . Overcapacity is also damaging as it has an effect on (…) the environment, (...) Cognizant of these problems, the authorities outlined capacity and employment reduction targets (...). According to official data, the authorities met capacity targets in 2016 and are on track to meet 2017 targets, partly due to tighter enforcement of environmental and regulatory standards. (...)

Within the Central Government, the National Development and Reform Commission (NDRC) is in charge of formulating and implementing national economic and social development strategies, medium-to-long term plans, and annual plans. According to the authorities, the NDRC is also responsible for, inter alia: guiding, advancing and coordinating economic system reforms; and conducting research on major issues relating to economic system reforms and opening-up to the outside world. The responsibility of MOFCOM includes formulating development strategies and policies for domestic and foreign trade and international economic cooperation; drafting laws and regulations and departmental rules for domestic and foreign trade, foreign investment, and foreign economic cooperation; guiding overall work related to foreign investment; and formulating and implementing foreign investment policies and reform plans. The Ministries of: (...) Environmental Protection, (...) also involved in the formulation and implementation of trade policy in the areas under their responsibility. (...)

On 17 March 2018, a decision on the institutional restructuring plan of the State Council was adopted by the 13th National People's Congress. The plan states, inter alia, that (…) the Ministry of Ecological Environment, (…) will be established, (…)

According to the authorities, China remains concerned about (…) energy conservation, and the protection of the environment. In this respect, the 2017 Catalogue for the Guidance of Foreign Investment Industries (Investment Catalogue) encourages foreign investment in those sectors that conform to China's industrial structure adjustment and "China Manufacturing 2025" strategy (...)

The Catalogue of Industries for the Guidance of Foreign Investment (Investment Catalogue) continues to serve as the main instrument used to guide FDI in China. The most recent revision to the Catalogue took place in 2017. The 2017 Catalogue contains: (1) a list of industries where FDI is encouraged; and (2) the investment negative list, which contains a list of industries where FDI is, inter alia, restricted or prohibited. [23]

[23] In general, projects in the "encouraged" category (those that the authorities are interested in promoting) are those that use improved technology and are less polluting, while "restricted" industries are those deemed to (...) over-exploit scarce natural resources or harm the environment. The "prohibited" category includes projects that pollute the environment, destroy natural resources or go against social and public interests.

(…) The 2017 Catalogue removed the requirement that Chinese shareholders must hold a dominant position regarding, inter alia, (…) manufacturing of power battery for new energy vehicles, (…) and production of biological liquid fuels. Certain activities that had been classified under the "encouraged" category entailing certain shareholding and senior management composition requirements in 2015 have been reclassified into the negative list in the 2017 Catalogue. The 2017 Catalogue intends to encourage FDI in, inter alia, (...) the energy saving and environmental protection industry, (...)

Box 2.1 Summary of main changes in the 2017 Investment Catalogue
(…)
Restricted Category/Restrictive Measures
(…)
(2) Activities removed from the restricted category as a result of removal of access restrictions to foreign investment:
(…)
Manufacturing:
(...)
8. Manufacturing of biological liquid fuel (fuel ethanol and bio-diesel)
(...)
Prohibited Category
(1) Activities removed from the prohibited category:
Manufacturing:
1. Processing of traditional Chinese medicines that have been listed in the Regulations on Conservation and Management of Wild Chinese Medicinal Material Resources and Rare and Endangered Plants in China
2. Ivory carving
3. Tiger bone processing