China’s New Market Access Negative List Targets Finance and Online Lending

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The latest iteration of China’s foreign investment negative list puts restrictions on the access of investors to the country’s finance and e-commerce sectors.

On 25 December the National Development and Reform Commission (NDRC) and the Ministry of Commerce jointly issued the “Market Access Negative List (2018)” (市场准入负面清单(2018年版), marking the comprehensive implementation of the market access negative list system across China.

The move comes after Beijing first debuted the negative list in March 2016 via the “Market Access Negative List (Trial Edition)” (市场准入负面清单草案(试点版)) that covered the four province-level administrative entities of Shanghai, Guangdong, Tianjin and Fujian.

The scope of the trial was subsequently expanded in 2017 to cover 15 province-level entities, including Zhejiang and Hubei.

The 2018 edition of the negative list outlines a total of 151 areas  and 581 detailed administrative measures, including four prohibited access areas and 147 permitted access areas.

This marks a drop of 177 areas, or nearly 54%, compared to the trial negative list, which covered a total of 328 areas including 96 prohibited access areas and 232 restricted access areas.

Market actors are not permitted to invest in prohibited access areas, while administrative agencies will refuse to review or approve investment in such areas.

Market actors are allowed to submit applications for investment in permitted access areas, while administrative agencies shall lawfully provide decisions as to whether to approve or deny investment.

The four prohibited access areas include:

i) Areas prohibited by laws, regulations or State Council decisions;

ii) Products, technologies, industrial techniques, equipment or conduct which are deemed outdated or restricted by national industrial policies, particularly as outlined by the “Industrial Structural Adjustment Guideline Catalogue” (产业结构调整指导目录);

iii) Financial business activities that are undertaken in breach of regulations, which covers two specific measures.

Firstly, non-financial institutions and enterprises that do not engage in financial activities are not permitted to use finance-related terms such as “bank,” “insurance,” or “trust company” in their registered names or business scopes.

Secondly, non-financial institutions and enterprises that do not engage in financial activities are not permitted to use finance-related terms such as “financial easing,” “commercial factoring” or “micro-loans” in their registered names or business scopes.

iv) Online business activities that are undertaken in breach of regulations, covering a total of five specific measures.

This includes a ban on lending information intermediation organisations from providing credit enhancement services, and directly or indirectly gathering funds or illegally raising funds in a manner which “harms national or community interests.”

The trial version of the negative list originally prohibited commercial banks from engaging in trust investment or securities business activities, as well as individuals and insurance entities that have not been established in accordance with relevant laws and regulations from engaging in insurance activities.

The new market access negative list also adds a “Local Permission Measures” column for the inclusion of access areas as established by local laws and regulations.

 

 

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