On December 28, the National Development and Reform Commission and the Ministry of Commerce of the People's Republic of China jointly released the Catalogue of Encouraged Foreign Investment Industries 2020 (the "Catalogue").

According to the Catalogue, the scope of industries where foreign investments are encouraged has been further expanded. Compared to the 2019 version, the Catalogue now has a total of 1,235 items, 127 of them new and 88 modifications.

The Catalogue sets out to further boost the role of foreign funds in development of industrial and supply chains, and continues to prioritize manufacturing industries for attracting foreign investment. New content to the Catalogue has been oriented from principles of "foreign investment to supplement chains", "foreign investment to enhance chains" and "foreign investment to extend chains".

New or modified items in the Catalogue include raw materials such as high-purity electronic grade hydrofluoric acid, hydrogen fluoride, special glass fiber, and polarizer base film; components and parts such as special valves, special glass and wheel speed sensors; and terminal products such as circuit testing devices, L3/L4/L5 automated driving hardware, ventilators, and artificial intelligence auxiliary medical equipment.

Foreign investments are also encouraged in production services sectors. Promoting integration of the services industries and the manufacturing industries was a key priority of the 2020 update to drive development of new business formats and new-style infrastructure as China continues to expand opening-up.

New or modified items in the development and design section include fifth-generation mobile telecommunication technology R&D, block-chain technology development, and sewage treatment facility design; in the commercial service section the items are for high-end equipment maintenance and digital production line renovation and integration; in the modern logistics section there is a focus on cross-border e-commerce retail, bulk commodity import and export distribution centers, and community distribution chains, as well as information services, online education, online medical services, and online working. The Catalogue encourages foreign investments in mid and western China.

It provides guidelines on the implementation of relevant rules in the Foreign Investment Law and its implementing regulation. This ensures policy continuity and also clarifies the industries, sectors and territories where foreign investments are encouraged by China.

The preferential policies state: encouraged foreign investment projects will enjoy import duty exemption on imported equipment for self-use within the total investment limit, except for those projects falling within the scope of the Catalogue of Imported Key Technical Facilities and Products Not Exempted from Duties and the Catalogue of Imported Goods Not Exempted from Duties from Foreign Investment Projects; qualified foreign-funded businesses in encouraged industries operating in western China or Hainan Province will be entitled to a 15 percent cut of corporate income tax; and encouraged foreign-funded industrial projects needing intensive land use will be entitled to preferential land supply where the floor price of land transfer is no less than 70 percent of the corresponding minimum price standard of national industrial-use land transfer in their place of operation in China, if applicable.