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The authorities consider that the revision of the Investment Catalogue denotes an important effort to comprehensively open up the Chinese economy to foreign investment. According to the information supplied by the authorities, the 2015 Catalogue includes a total of 423 entries, 48 less than the 2011 Catalogue. The authorities also noted that the number of restricted sectors was reduced from 79 in 2011 to 39 in 2015; while the number of encouraged sectors remained mainly unchanged (Box 2.2; Table A2.3; and Table A2.4). The revised Catalogue aims at channelling FDI towards industries that require restructuring through the use of new equipment and new and greener technologies. According to the authorities, the 2015 Catalogue was revised to open the economy mainly in the services sector but also in manufacturing; the revision is intended to promote the use of foreign investment in a more efficient manner.

Box 2.2 Summary of the major changes in the 2015 Investment Catalogue
Encouraged Category
Industries that are no longer restricted to Sino-foreign equity/cooperative joint venture operations or equity shareholding requirements (i.e. Chinese parties as the controlling shareholders) or for which these restrictions have been somewhat relaxed:
Services: leasing and commercial services industries (e.g. accounting and auditing); water conservancy, environmental and public facilities management industries; transport (e.g. construction and operation of urban subway, light railway and other modes of track transport); entertainment (operation of performance sites).
(...)
Prohibited Category
Activities removed from the prohibited category
Agriculture: research and development of genetically modified varieties; (...)
Manufacturing: manufacturing of open-lead-acid cells, mercury buttontype silver oxide cells, paste dioxide-zinc battery and nickel cadmium cells; bodiless lacquerware and of enamel products; production of carcinogenic, teratogenic, and other organic pollutant products.
(...)
Activities included in the prohibited category
Agriculture: seed selection of genetically modified varieties.
Mining and energy: Production of nuclear energy.
(...)

The revision of the Investment Catalogue appears to be consistent with the goals of the 12th Five Year Plan, which calls for a more efficient use of foreign investment in sectors such as modern agriculture, high and new technology, advanced manufacturing, energy conservation and environmental protection, new power sources, and modern service industries, areas in which foreigners should be encouraged to invest.

Projects subject to verification (approval) are those listed in the Catalogue of Investment Projects Subject to Government Verification , while most of the other projects not included in it are subject to record-filing. Verification (i.e. approval), requires the examination of the investment project, and a number of conditions need to be met, including those related to the environmental impact of the project and to land use. (...)

According to the authorities, FIP (foreign-invested project) applications are in general approved as long as they have no negative impact on national security, the environment or public interest, and they comply with the relevant laws and regulations; the Catalogue for the Guidance of Foreign Investment Industries; the Catalogue of Priority Industries for Foreign Investment in the Central-Western Regions of China; and the national development plans and industrial policies.

Projects in sectors listed in the Catalogue of Priority Industries for Foreign Investment in the Central-Western Regions of China are entitled to the same preferential treatment as those classified as "encouraged" in the Investment Catalogue. These projects benefit from customs duty exemptions on the importation of capital goods and continue to enjoy a reduced enterprise income tax (EIT) rate of 15%; this benefit will be in place until 2020. The Central and Western Regions Catalogue was last revised in 2013 to enlarge its sectoral and geographical scope: it now has 500 sectors, 173 more than the previous Catalogue, and its geographical coverage was extended. At present the Hainan province is also covered by the Catalogue. Newly included sectors were related to emerging industries and services (solar power generation and its equipment, spare parts manufacturing, cloud computing, the "Internet of Things", and mobile Internet).

Table 2.2 Incentives in the form of preferential tax treatment under the Enterprise Income Tax Law
Type of enterprise Conditions for eligibility Form of the incentive
All enterprises Income derived from one of the following:
• Projects in agriculture, forestry, animal husbandry and fisheries;
• Public infrastructure investment projects supported by the State
• Qualified projects related to environmental protection, and energy and water conservation
• Qualified transfer of technology Deduction/exemption from income tax
(...)
All enterprises Investment made in specialized equipment for environmental protection, energy and water conservation, or production safety Partial deduction of the invested amount from income tax

Importers (and exporters) need to comply with the inspection and quarantine requirements of Customs and the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), as stipulated by law and by the Catalogue of Import and Export Commodities Subject to Compulsory Inspection. The Catalogue is amended every year to add or remove commodities as required to protect human, animal or plant health and the environment, and to prevent fraud and safeguard national security.

A number of imported and domestically-produced goods are also subject to the consumption (excise) tax. The consumption tax is levied on: products that are harmful to human health, social order and the environment; luxury goods; high-energy consumption and high-end products; and non-renewable and non-replaceable petroleum products. Tax rates continue to vary considerably depending upon the product; they can be ad valorem, specific or compound. Tax rates and the list of products subject to this tax may be modified as required (Table 3.4).

Import prohibitions, restrictions and non-automatic licensing are maintained in China to safeguard national security; public morality; human, animal and plant health; the environment and exhaustible natural resources; to comply with China's obligations under international agreements; and for balance-of-payments reasons. (...)