Shorter negative list provides higher investor freedom

Authorities in the China (Shanghai) Pilot Free Trade Zone have released an updated version of the negative list, a shorter one meant to grant more freedom to investors.

The list, which comprises 139 clauses marking forbidden or restricted areas for investment activities in the 28 sq km zone, has been reduced by more than a quarter compared with the previous one that contained 190 clauses.

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Besides adjustment and combination of some clauses, the 2014 version has in practice removed 14 prohibitions on investment, and relaxed restrictions in 19 areas.

For example, it has given more freedom to financial operations and property development, and removed the prohibition clause on the lottery industry, although some observers said the lottery sector would still be forbidden in the area because it is illegal.

The negative list now has 110 restrictive clauses and 29 prohibitive ones.

The new list also gives more transparency to investors, as restrictive clauses without any particular conditions have been reduced from 55 to 25.

The negative list was an innovative management approach introduced in Shanghai FTZ when the pilot zone was launched in September. It only marks restricted areas while those not on the list will be free to enter for investors. Last year’s version was criticized for having too many restrictions and a lack of transparency.

Industrial associations, foreign companies and research institutes were consulted in preparing the revised list, according to a statement on the official website of the Shanghai municipal government.

The list will be amended in accordance with future development in the FTZ and legislation, it said.