On 19 February 2025, China’s Ministry of Commerce (“MOFCOM”) and National Development and Reform Commission jointly issued the 2025 Action Plan for Stabilising Foreign Investment (“Action Plan”). Policymakers have repeatedly affirmed the pivotal role played by foreign investment in the pursuit of high-quality opening-up. The Action Plan, therefore, serves as the logical and natural continuation of these long-standing efforts to nurture innovative productive forces. The 20 measures under 4 aspects specified in the Action Plan are to be implemented nationwide by the end of 2025. Details regarding ancillary measures to facilitate their effective and efficient implementation will be released in due course.
Foreign investment trends
Emerging from a challenging patch of post-COVID economic recovery in 2023, China rose from the ashes and regained some of its momentum last year. In a positive turn, the first three quarters of 2024 indicated evident signs of a gradual rebound, with foreign investment inflows hitting RMB 640.6 billion. In particular, a 11.4-per-cent surge in the number of newly formed foreign-invested enterprises (“FIEs”) was observed. A total of more than 59,000 FIEs were established in the whole of 2024.
In addition, the world’s second-largest economy saw significant strides in the utilisation of foreign capital in the areas of high-tech manufacturing, medical devices, and specialised technical services. It is worth highlighting the successes of the manufacturing sector. In 2024, the industry drew in more than RMB 220 billion in foreign investment. High-tech manufacturing made up 11.7 per cent of the overall foreign investment total, boasting pronounced growth in key segments. Foreign investment in medical equipment and instrument manufacturing leapt by 98.7 per cent, while computer and office equipment enjoyed a 21.9-per-cent increase.
“Invest in China” brand
Since the start of 2023, China has launched a host of initiatives under the “Invest in China” branding campaign, welcoming multinational corporations to China while also supporting Chinese businesses in expanding abroad. The campaign also serves as a valuable platform for foreign investors to access, explore, and invest in the thriving Chinese market. Moreover, it showcases China’s abundant resources, industrial prowess, and dynamic business environment, providing investors with a comprehensive understanding of the opportunities on offer.
At last year’s “Invest in China” Summit held in Beijing, attendees underscored their unwavering confidence in China as a go-to investment destination. As well as being a vital consumer market and a manufacturing powerhouse, China is now at the forefront of innovation and a burgeoning hub for engineering talent. Executives from multinationals added that China served as a “testing ground” for foreign companies, as products that perform well in the Chinese market typically gain a competitive upper hand elsewhere.
Going forward, as outlined in the Action Plan, China will continue to consolidate its “Invest in China” branding initiative by refining its foreign investment promotion mechanisms through institutional reforms. Every year, a detailed implementation plan will be developed, alongside a thoughtfully crafted lineup of promotional activities. Additionally, both national and local administrations will join forces in overseas investment promotion endeavours. The aim is to enhance the manufacturing sector’s supply chains and industrial capabilities through foreign investment. Tailored approaches catering to the unique traits of key foreign investment sources will be developed, in collaboration with various bilateral economic and trade committees. Further, bilateral investment promotion working groups will be fully leveraged to streamline project matchmaking efforts.
Sectoral pilot programmes
According to the Action Plan, China plans to enlarge the scope of its pilot programmes to broaden accessibility in the telecommunications, healthcare, and education sectors. Specifically, the nation will provide support to designated pilot regions in their endeavours to promote and enact liberalisation policies for value-added telecom services, biotechnology, and wholly foreign-owned hospitals. Dedicated specialist teams will also be set up to monitor foreign investment projects, address challenges promptly, and expedite their implementation. On the education and culture fronts, frameworks will be devised aimed at progressively opening up the sectors through measured and consistent efforts.
Telecommunications
In October 2024, China’s Ministry of Industry and Information Technology introduced a pilot programme to lift the cap on foreign ownership of data centres and various value-added telecom services in Beijing, Hainan, Shanghai, and Shenzhen. These four cities are lauded for their innovative spirit, advanced digital infrastructure, and advantageous geographic positioning. Previously, foreign investors had been limited to a maximum 50-per-cent stake in the sector.
Drawing on its distinct strengths, each city has formulated a tailored strategy for the pilot programme. For instance, Shenzhen, celebrated as the nation’s buzzing high-tech hub, will empower tech enterprises to break new ground in improving digital infrastructure and telecom services. These advancements will integrate different applications of emerging technologies, such as cloud computing and generative artificial intelligence.
Healthcare
In November 2024, China’s National Health Commission, in collaboration with three other government bodies, released an implementation plan for establishing wholly foreign-owned hospitals in Beijing, Fuzhou, Guangzhou, Nanjing, Shanghai, Shenzhen, Suzhou, Tianjin, and Hainan Island. Foreign investment in medical institutions had traditionally been limited to joint ventures with Chinese enterprises, except in exceptional cases.
It should be noted, however, that eligibility does not extend to hospitals specialising in traditional Chinese medicine, alternative ethnic medicine, integrated Chinese-Western practices, psychiatry, or the treatment of infectious diseases and haematological malignancies. Furthermore, foreign investors are not permitted to acquire public hospitals.
On a related front, in September 2024, the MOFCOM issued a circular removing restrictions on FIEs conducting cell and gene therapy in select free trade zones (“FTZs”). The designated locations are Beijing Pilot FTZ, Guangdong Pilot FTZ, Shanghai Pilot FTZ, and Hainan Free Trade Port. Due to ethical and biosecurity risks, particularly arising from the control of genetic and genomic data, China had long imposed restrictions on foreign investment in human stem cell research, gene diagnostics, and the development and application of treatment technologies.
Biomedicine
According to the Action Plan, China is set to incrementally expand access to its biomedicine sector, allowing qualifying FIEs to engage in certain aspects of biologics manufacturing on a trial basis. As part of the initiative, authorities will accelerate the review process for pilot and quality-control schemes at the provincial level, while also striving to better allocate resources within the industry. Additionally, proactive measures will be implemented to facilitate the swift handling of any challenges faced by participating enterprises during the pilot phase. Furthermore, policymakers are leaving no stone unturned, exploring every possible avenue to speed up the introduction of new drugs, fine-tuning the framework for bulk pharmaceutical procurement, and instilling greater consistency in practices relating to medical device procurement.
Education
With a vast student demographic and an ever-escalating demand for a variety of educational offerings, China’s education sector is brimming with opportunities. The nation – home to the world’s most extensive publicly run educational system – has made significant inroads in delivering top-notch education renowned for its rigour and competitiveness. The introduction of the “Double Reduction” Policy back in 2021 ushered in a profound shift in the education milieu. The transformative policy sought to lessen the total quantity and time commitment associated with school-related assignments. In addition, it aimed to alleviate the strain on both students and parents – physical, psychological, and financial – posed by training programmes held outside regular school hours.
The advent of emerging technologies has given rise to “EdTech” – a rapidly evolving field that integrates artificial intelligence, digital tools, and online platforms to enhance and personalise learning experiences, as well as to improve accessibility. The government has introduced several key initiatives to enhance education with the aid of technology and innovation. For example, the “Balanced Basic Public Education Service System”, launched in 2023, focuses on developing intelligent education platforms, particularly benefitting rural and underserved communities. Additionally, the “Artificial Intelligence Empowering Education” initiative, launched in 2024, promotes AI-propelled advancements in learning and teaching.
Business-friendly policies for foreign-invested businesses
Based on data published by the MOFCOM, foreign-invested businesses fuel the lifeblood of the Chinese economy. Their contribution accounts for approximately one-seventh of tax income, around one-third of foreign trade, and half of the exports in electromechanical and high-tech sectors. Moreover, they generate close to 7 per cent of employment opportunities in China. Today, China’s foreign investment scene is colourful and lively, encompassing 115 key sectors and 20 industrial categories. Notably, the presence of foreign investment is evident across 31 principal categories and 548 subcategories. It is, therefore, imperative for policymakers to implement supportive regulatory frameworks, with a particular focus on refining policies that promote fairer market access and providing incentives to encourage FIEs’ further participation in the Chinese economy.
Below are the key policy measures proposed in the Action Plan.
Broadening access to strategic industries and regions
In its pursuit of new industrial growth driven by the high-tech engine, China is keen to widen the doors to foreign investment. The strategy aligns with Beijing’s overarching goal of modernising its industrial sector and achieving technological self-reliance. Foreign businesses operating in cutting-edge fields, such as advanced manufacturing, automation technologies, artificial intelligence, and green energy, stand to gain from expanded market access and policy measures conducive to foreign investment. These may include relaxing rules for joint ventures and fostering a more open regulatory environment. This transition sharpens China’s competitive edge, while also allowing foreign investors to capture more opportunities in the world’s foremost manufacturing powerhouse.
As outlined in the Action Plan, China is committed to ensuring the proper enforcement of policies that eliminate entry barriers to foreign investment in the manufacturing sector and ease restrictions in other sectors. The 2024 iteration of the Negative List abolished the two remaining restrictions in the sector. In livestock management-related sectors including breeding, manufacturing of rearing equipment, animal feed preparation, and veterinary medical services, government bodies will ensure that foreign investors receive the same treatment as their domestic counterparts. Plans are also underway to further revise the Negative Lists, trimming the number of industries that are off-limits to foreign investment.
The government is actively updating and expanding the Catalogue of Encouraged Industries for Foreign Investment. Other industries in the spotlight where more foreign investment is currently being sought include culture and tourism, elderly care, finance, sports, modern services, and vocational education. The Beijing demonstration zone will serve as a pioneering model for the nationwide liberalisation of the services sector. It will spearhead the development of pilot initiatives and opening-up measures.
Geographically speaking, China’s central, western, and northwestern regions are trying to reel in a greater influx of foreign capital to turbocharge their development.
Encouraging reinvestment
A central objective of the Action Plan is to promote domestic reinvestment by FIEs. The government will double down on efforts in developing policies that incentivise reinvestment, galvanising companies to channel a bigger share of their China-generated profits back into the local economy. A pilot initiative will also be launched to better facilitate the tracking and reporting of foreign investment activity in the country.
According to the latest figures from the State Taxation Administration, foreign enterprises, made a record reinvestment, to the tune of RMB 162.28 billion, in 2024. This upward trend can, in large part, be attributed to the deferred taxation policy, which grants foreign investors a temporary reprieve from certain tax liabilities. It is, however, subject to an important caveat: the profits must be reinvested in domestic projects or industries. In 2024, foreign reinvestment, spurred by the preferred taxation policy, rose by 15 per cent year on year. There was a substantial uptick in investments originating in economies involved in the Belt and Road Initiative, with reinvestments from Singapore and South Korea soaring by 1.4 times and 66.5 per cent respectively.
Widening the range of financing channels
To enhance access to a variety of financing options, China is calling on financial institutions to improve their lending services for FIEs. They are encouraged to conduct a detailed assessment of FIEs’ differentiated financing needs and customise their offerings accordingly. To this end, policymakers will facilitate targeted matchmaking between banks and eligible businesses.
On 28 February 2025, People’s Bank of China, along with other leading financial authorities, held a high-level symposium to explore different strategies for stimulating the growth of enterprises, acknowledging the latter’s critical role in fostering innovation. Key measures discussed at the symposium include the comprehensive adoption of a 25-point plan that was earlier proposed to bolster financial aid for the private sector, upgrades to credit support mechanisms, and the expedited roll-out of regulations governing supply chain finance.
Streamlining trade procedures for FIEs
China will focus on the issuance of Certificates of Origin as part of preferential trade agreements so that FIEs will be able to leverage tariff reductions from their trading partners. A Certificate of Origin is a document, certifying that the product concerned has fulfilled the requisite criteria to be deemed as originating in a particular country. Such documentation is required for businesses to avail themselves of preferential treatment, such as zero or reduced tariffs and other trade concessions, under treaty-based trade agreements.
In addition, inspection procedures and regulatory protocols for the importation of full equipment sets for major projects backed by foreign investors shall be optimised. FIEs will receive more support in obtaining the “Authorised Economic Operator” certificate. Holders of this certificate are subject to fewer random inspections. The “Authorised Economic Operator” designation attests to a business’ compliance robustness in the movement of goods along the international trade supply chain, and its adherence to customs control procedures.
Enhancing ease of setting up investment companies
To entice more multinationals to set up their regional headquarters (and comparable entities) in China, policymakers are optimising the rules governing the establishment of investment companies. Steps will be taken to increase the efficiency of foreign exchange administration, facilitate the international relocation of personnel, and alleviate the compliance burden associated with cross-border data transfers. Entities that have been set up and funded by foreign investment companies will be granted eligibility for FIE status, in accordance with the prevailing laws and regulations. They will be conferred the corresponding rights, benefits, and subject to the same regulatory treatment, including the possibility to secure domestic loans for equity investments.
On the personnel mobility front, Beijing will quicken the pace of negotiations on mutual visa exemption arrangements, while judiciously widening the application of its own visa-free policy. The rules pertaining to port visas, visa-free transits, and regional visa exemptions will be optimised to facilitate smoother and more convenient personnel movement. Further, the Guide to Working and Living in China for Business Expatriates will be updated to provide comprehensive information for foreign professionals residing in the country.
Promoting a level-playing field in government procurement
As part of its broader efforts to ensure national treatment for FIEs, China plans to amend its Government Procurement Law. Specifically, it is drawing up clear criteria and a precise definition for determining what constitutes “domestic production” by FIEs.
This move builds upon the Notice on Matters Related to Domestic Product Standards and implementation Policies in the Government Procurement (Draft for Comments), issued by the Ministry of Finance at the end of 2024. The policy aims to establish a transparent framework ensuring fair competition and a level-playing field for enterprises of different ownership setups, including state-owned, private, and foreign-invested businesses. Providing a better formulated and consistent definition of “domestic products” can offer FIEs more reassurance concerning their eligibility for government procurement opportunities.
Increasing inflows of foreign capital into equity markets
The Action Plan also delineates measures to promote the investment of foreign stakeholders in publicly listed Chinese enterprises and supporting their participation in mergers and acquisitions (“M&A”). Under the framework of the Foreign Investment Law, the Provisions on the M&A of Domestic Companies by Foreign Investors will undergo revision. The amended rules will feature a more precise regulatory scope, streamlined transaction and administrative procedures, as well as a reduced threshold for cross-border share swaps.
In line with this wider effort, regions up and down the country are revising their investment frameworks to enhance their allure to overseas investors. A notable example is Shanghai’s recent expansion of its foreign exchange policy under the Qualified Foreign Limited Partner Programme. Initially implemented in the Lin-gang New Area in October 2024, the policy has now been extended to cover the entire city of Shanghai. Its objective is to amplify the role of equity investments in fostering economic growth and driving technological innovation.In particular, it aims to speed up the formation of an all-encompassing financial services system that meets the diverse needs of sci-tech enterprises at every stage of development.
How CW can help you establish a foothold in China
With offices in Shenzhen, Guangzhou, and Shanghai, our firm is well positioned to assist you in making an impactful and successful debut in the Chinese market. As China continuously refines its foreign investment Negative Lists and expands its pilot schemes, our seasoned professionals can offer you expert guidance on investment access, as well as market entry and expansion strategies tailored to your business. With over 30 years’ experience helping businesses of different industries and sizes establish a strategic presence in China, we provide a holistic, one-stop solution – from entry and setup to helping you lay the groundwork for long-term growth and success.
Contact us to find out how you can leverage the new opportunities presented in the article above.
