What’s Off-Limits in China’s Newly Revised ‘Negative List’ for Investment

China has unveiled a draft revision to a list of industries for which investment is restricted or prohibited, reducing the overall number of businesses subject to entry barriers while adding new restrictions for media, finance and cryptocurrency.

The National Development and Reform Commission (NDRC) and the Ministry of Commerce Friday published the draft “negative list” (link in Chinese), seeking public comments for its annual revision until Oct. 14.

The “negative list” details industries that are off-limits to both Chinese and foreign investors. Anything that’s not on the list is free to invest in. China started the national negative list in 2018 as part of a broader effort to streamline administrative management over investments. It has revised the list every year.

Compared with the 2020 version, the latest draft reduced the number of restrictive operations from 123 to 117, removing approval requirements for a number of businesses such as security training, online insurance and merger and acquisition deals by certain listed companies.

The draft 2021 list (link in Chinese) includes six prohibited categories and 111 items subject to regulatory approval. It added a new section of prohibitions on investments in the news and media industry, sparking concerns over tightening control.

However, most of the media industry restrictions were already on the 2020 list, but reclassified under a designated section. They include banning the investment of “non-public” capital in the establishment and operation of news outlets, online news gathering, editing and broadcasting, a comparison between the two lists showed. Newly added restrictions include non-public capital’s reproduction of news content from foreign media sources and organizing of news industry summits and awards.

The new list also barred nonfinancial institutions for being involved in wealth management, equity crowdfunding and exchange businesses, extending last year’s ban on nonfinancial companies’ involvement in the banking, insurance, securities and fund management businesses.

Cryptocurrency mining was also added into the industries that will be barred from new investment, following a series of crackdowns on the business. China’s central bank last month declared that all cryptocurrency-related transactions are illegal and vowed to root out crypto mining.

The revised list also extended regulatory reviews of senior financial executive appointments to personal credit rating companies and bank clearing institutions.

In 2016, China first tested managing investments with a negative list in four cities as a market liberalization pilot. The practice was expanded nationwide in 2018. The first national negative list contained 151 items under prohibition or restriction, 22.5% more than the latest draft.

Contact reporter Han Wei (weihan@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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