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China’s 2023 Foreign Investment Catalogue
2022-11-01Owen Cox | Amy Cao

China has newly incentivized foreign investment in manufacturing and certain services. The incentives are offered for new, qualifying foreign-invested projects from January 1, 2023. We would be pleased to help you to invest in China.

 

Background

 

The 2023 Catalogue of Encouraged Foreign Investment (the "2023 Catalogue”) sets out industries and projects in which China wants foreign investment to further its need for economic and social developments. Incentives are available for foreign investors that invest accordingly.

 

The current catalogue (2020 version) was approved in late 2020 and came into force in January 2021, one year after the outbreak of the Covid-19 pandemic.

 

Like earlier catalogues, the new 2023 Catalogue remains subject to the Special Administrative Measures (negative List) for Access of Foreign Investments, which sets out prohibited projects and projects subject to specific restrictions.

 

New 2023 Catalogue

 

The new 2023 Catalogue was issued on October 28, 2022 and will be effective January 1, 2023. Compared to the 2020 version, this new 2023 Catalogue adds 239 items and has 1,474 items in total. The new items are mainly in the following sectors:

 

Manufacturing (Chapter III), particularly:

  • Manufacturing of Chemical Raw Materials and Chemical Products (Section. X, Chapter III);

  • Pharmaceutical Industry (Section XI, Chapter III);

  • Special-purpose Equipment Manufacturing (Section XVIII, Chapter III); and

  • Computer, Communication, and other Electronic Equipment Manufacturing (Section XXII, Chapter III)

Environmental technologies, such as:

  • “advanced system integration technology and service that is low-carbon, environment-friendly, green, energy-saving and water-saving”, in Scientific Research, Development and Products, and Technical Services (Chapter IX);

  • “recycling of photovoltaic module waste", in Comprehensive Utilization of Waste Resources (Section XXIV, Chapter III); and

  • “new technologies, new product development and production in the recycling use of waste wood”, in Industries of Wood Processing and Manufacturing of Wood, Bamboo, Rattan, Palm and Straw Products (Section VII, Chapter III)

Rural development (including investments in central and western China), such as:

  • “rural e-commerce” and “rural tourism”, in Agriculture, Forestry, Animal Husbandry and Fishery (Chapter I); and

  • “technology development and application of digital intelligent breeding of livestock and poultry”, in the sub-catalogue of Liaoning Province

Elder education/service/care industry, such as:

  • “elderly living environment renovation, public facilities renovation for elderly and disability people”, in Health and Social Work (Chapter XII)

Vocational education, such as:

  • “non-academic arts vocational training institutions (excluding institutions for primary and secondary school students and pre-school children aged 3-6)”, in Education (Chapter XI)

The new 2023 Catalogue particularly encourages investment in components and equipment manufacturing with a view to improving industrial and supply chains. Emphasis is also placed on professional design and technology services in order to strengthen China’s manufacturing industries.

 

The focus on manufacturing aims to strengthen China’s role in global supply chains at a time when much of the rest of the world is looking to diversify supply chains.

 

Incentives

 

Foreign investors setting up new projects that are included in the new 2023 Catalogue may benefit from the following incentives (introduced by the State Council for the 2020 version):

  • Customs tariffs and tax exemptions on equipment imported for use in applicable projects;

  • Corporate income tax reduced from 25% to 15%; and

  • Land subsidies.

Other investments remain welcome

 

China also continues to welcome foreign investment in projects not listed in the foreign investment catalogue and not listed in the negative list.