As China continues to deepen its reforms and expand market access for foreign investors, those considering investment in the Chinese market should pay close attention not only to the Special Administrative Measures (Negative List) for Foreign Investment Access, but also to the Catalogue of Industries for Encouraged Foreign Investment (hereinafter, the “Encouraged Catalogue”). This catalogue outlines the industries and sectors in which foreign investment is actively promoted and supported by the Chinese government, and serves as a basis for preferential policies and incentives.
Determining whether a proposed investment project falls within the scope of the Encouraged Catalogue has material implications for investment costs, regulatory approvals, tax treatment, and resource allocation.
I. Legal Basis #
1. Foreign Investment Law and Implementing Regulations #
Foreign Investment Law of the People’s Republic of China (promulgated January 2019, effective January 1, 2020) #
Article 14 provides:
“The State shall, in accordance with the needs of national economic and social development, encourage and guide foreign investors to invest in specific industries, fields, and regions. Foreign investors and foreign-invested enterprises may enjoy preferential treatment in accordance with laws, administrative regulations, or provisions of the State Council.”
Although the Encouraged Catalogue is not explicitly named, this provision establishes the legislative foundation for granting preferential treatment to encouraged foreign investments.
Implementing Regulations for the Foreign Investment Law (effective January 1, 2020) #
Article 11:
“The State shall, in accordance with the needs of national economic and social development, formulate a catalogue of industries for encouraged foreign investment, listing the specific industries, fields, and regions where foreign investment is encouraged and guided. The catalogue shall be formulated by the investment department of the State Council in coordination with the commerce department and other relevant departments, and shall be published upon approval by the State Council.”
Article 12:
“Foreign investors and foreign-invested enterprises may enjoy preferential treatment in terms of fiscal support, taxation, finance, land use, and other areas in accordance with laws, administrative regulations, or provisions of the State Council.”
These provisions clearly support preferential treatment—financial, tax-related, and otherwise—for foreign investment in specific industries, fields, and regions listed in the catalogue.
2. Catalogue of Industries for Encouraged Foreign Investment #
The Encouraged Catalogue is jointly formulated and revised by the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM). It comprises:
A nationwide list of encouraged industries;
Regional sub-catalogues specific to the central, western, and northeastern regions of China.
The catalogue is periodically updated to reflect changes in industrial policy, regional economic development strategies, and the global trade environment.
Catalogue Issuing Authorities and Access Channels: #
(1) Issuing Authorities:
The NDRC and MOFCOM jointly publish the catalogue in alignment with national macroeconomic policies and industrial development plans. The catalogue reflects China’s industrial policy direction and strategic objectives for foreign investment.
(2) Access Channels:
Official website of the NDRC: http://www.ndrc.gov.cn
Official website of MOFCOM: http://www.mofcom.gov.cn
State Council Gazette and Database: https://www.gov.cn/gongbao
The catalogue is typically published with corresponding industry classification codes and detailed descriptions. Foreign investors should carefully match their proposed investment’s nature and scope with the catalogue to determine eligibility.
The current version is the Catalogue of Industries for Encouraged Foreign Investment (2022 Edition), effective January 1, 2023:
https://www.gov.cn/zhengce/2022-10/26/content_5737552.htm
In special zones such as the Hainan Free Trade Port, additional encouraged industries may be added based on regional development needs. See: Hainan Free Trade Port Catalogue of Encouraged Industries (2024 Edition), effective March 1, 2024:
https://www.ndrc.gov.cn/xxgk/zcfb/ghxwj/202403/P020240301316685271399.pdf
II. Incentives for Projects Listed in the Encouraged Catalogue #
Where a proposed investment falls under an industry listed in the Encouraged Catalogue, the foreign investor may benefit from various preferential policies and regulatory advantages, including but not limited to:
1. Streamlined Approvals and Regulatory Facilitation #
Encouraged industries are generally exempt from restrictive foreign investment measures. Investors may benefit from simplified filing or approval procedures, without being subject to stringent administrative licensing or equity ratio limits. Projects listed in the Encouraged Catalogue often enjoy expedited approval processes for construction permits, environmental and energy assessments, planning, and other regulatory matters.
2. Tax and Tariff Incentives #
Under applicable tax policies and ministerial regulations, qualifying encouraged projects may enjoy:
Reduced corporate income tax (CIT) rates (e.g., 15%);
Exemptions or reductions in customs duties and VAT on self-use imported equipment;
Other tax reductions or exemptions contingent on satisfaction of certain criteria.
3. Priority Access to Land and Resource Allocation #
Local governments may offer priority land use rights and preferential treatment in infrastructure development for encouraged foreign investment projects. Such preferential treatment may be codified in local regulations, policy guidelines, or joint directives issued by local development, commerce, and natural resources departments.
Local implementation measures—such as investment attraction policies, industrial support plans, and land use facilitation schemes—are often tailored to encourage foreign investors listed under the catalogue.
4. Financing Support #
Qualified encouraged projects may benefit from Preferential credit access and Other incentives to facilitate project establishment and scaling.
These are often detailed in policy documents issued by the NDRC, Ministry of Industry and Information Technology (MIIT), MOFCOM, Ministry of Science and Technology (MOST), and Ministry of Finance (MOF). Such documents may include high-tech project certification, green/low-carbon project incentives, or industrial upgrading plans—each of which may be linked to financial or tax-related benefits.
5. Regional Policy Advantages #
Projects listed in the Encouraged Catalogue that are located in: National-level new areas, Pilot Free Trade Zones (FTZs), Free Trade Ports (FTPs), High-tech industrial development zones, or Economic and technological development zones, may enjoy region-specific policy advantages, such as: Streamlined establishment procedures; Flexible foreign exchange controls; R&D funding support; Talent incentives and residence permit facilitation.
For instance, under the Master Plan for the Hainan Free Trade Port, eligible foreign-invested enterprises benefit from broader liberalization measures.
6. Local Government Support Programs #
Local governments may offer more incentives, and these incentives are usually reflected in local regulations, government gazettes, industrial support policies, or foreign investment promotion frameworks.
Conclusion #
Reviewing whether a proposed investment project falls within the Catalogue of Industries for Encouraged Foreign Investment is a critical step in entering the Chinese market. Projects under the encouraged category are eligible for a wide range of fiscal, tax, financial, and land-related incentives, while also benefiting from a more favorable regulatory environment.
Foreign investors are strongly advised to consult legal counsel or qualified advisory firms to review the most recent versions of the Encouraged Catalogue and related industrial policy documents. In cases of uncertainty, investors should seek authoritative clarification from the NDRC, MOFCOM, or relevant local commerce departments.
Moreover, using the Encouraged Catalogue and its associated incentives as a framework, investors should conduct a comprehensive assessment of:
- Investment cost,
- Return cycle,
- Compliance obligations, and
- Policy risk exposure.
By fully understanding and leveraging the policy direction outlined in the Encouraged Catalogue, foreign investors can lay a solid, flexible, and efficient foundation for their long-term success in China.
This article is for informational purposes only and does not constitute legal advice. For case-specific consultation, please contact us. Read our full Legal Disclaimer, which also includes information on translation accuracy.
