China revises rules on foreign investment

China released revised guidance for foreign investment on Friday, relaxing many restrictions on overseas capital.

"The catalogue of industries to guide foreign investment" issued by the National Development and Reform Commission (NDRC) in conjunction the Ministry of Commerce, opens more areas, mainly services and manufacturing, to foreign business with lower thresholds.

Now in its sixth version, the catalogue consists of three parts: industries where foreign investment is encouraged, restricted and banned.

The latest revision more than halves the number of industries with restrictions from 79 to 38. Industries in which Chinese investors must hold stakes were axed from 43 to 15, and those demanding Chinese investors hold controlling stakes from 44 to 35.

Foreigners are barred from 36 industries, compared from 38 in the previous version.

The industries where foreigners are encouraged remain largely the same with some fine tuning to accommodate advanced technology and new materials.

Foreign investors are allowed to do business in all industries that do not appear in the catalogue.

The list will come into effect on April 10.

"Foreign investment brings not only money, but technology and management expertise, crucial to industrial upgrading," said Wang Yiming, former secretary-general of the NDRC.

Zhao Jinping, of the State Council development research center, believes some domestic companies can compete with foreign rivals.

"Chinese enterprises that are less resilient will be forced to strengthen themselves to avoid being knocked out by the competition," said Zhao.

China is seeking new growth by opening its doors against a backdrop of slowing economic expansion, environmental pressure and rising labor costs at home.

Premier Li Keqiang said in his annual report last week that China will improve regulation of foreign investment and create a "stable, fair, transparent and predictable" business environment.

China topped the world for foreign direct investment in 2014, with 120 billion U.S. dollars coming into the country. The number of new foreign-funded companies increased by 5.76 percent to 38,400 last year.