On 14 July 2023, China’s National Development and Reform Commission (“NDRC”) issued an announcement soliciting comments on its revised Guiding Catalogue for Industrial Restructuring (“Guiding Catalogue”). According to Interim Provisions on Promoting Industrial Structure Adjustment promulgated by the State Council of the People’s Republic of China on 2 December 2005 (“Interim Provisions”), Guiding Catalogue not only guides the direction of investment in China but also provides an important basis for China’s government authorities to manage investment projects, formulate and implement policies on finance and taxation, credit, land, import and export, and related important economic areas.
The third chapter of the Interim Provisions focuses on Guiding Catalogue for Industrial Restructuring. The Articles involved in this chapter are Articles 12 to 19. According to Articles 13 to 19, the Guiding Catalogue consists of three categories: encouragement, restriction and obsolescence. The encouraged category mainly refers to key technologies, equipment and products that have an important role in promoting economic and social development and need to be encouraged and supported. The restricted category includes the production capacity, technology, equipment and products with old technology which shall be urged to renovate and prohibited from re-application. The obsoleted category mainly refers to outdated technology, equipment and products that do not comply with relevant laws and regulations and shall be obsoleted immediately or within a limited time.
According to Article 12 of the Interim Provisions, the Guiding Catalogue generally applies to all types of entities within the territory of China; the implementation of foreign investment shall refer to the Catalogue for the Guidance of Foreign Investment Industries (“Catalogue for Foreign Investment”); the Guiding Catalogue is one of the main bases for revising the Catalogue for Foreign Investment; and the items in the obsoleted category apply to foreign-invested entities. The Catalogue for Foreign Investment, which last revised edition is issued on 28 June 2017, consists of the Catalogue of Encouraged Industries for Foreign Investment (“Encouraged Catalogue for Foreign Investment”) and Negative List for Foreign Investment Access (“Negative List”) which is established according to the Opinions on Implementing the Market Access Negative List Regime issued by the State Council on 2 October 2015 (“Opinions”). The version of the Encouraged Catalogue for Foreign Investment currently in effect is issued by the NDRC on 26 October 2022, while that of the Negative List is issued by the NDRC and the Ministry of Commerce on 12 March 2022. The Negative List includes two categories: restriction and prohibition. According to Article 14 of the Opinions, the items in the obsoleted category and new projects in the restricted category of the Guiding Catalogue are quoted directly in the prohibited category of the Negative List, and the relevant amendments made in the Guiding Catalogue in the future will directly apply to the Negative List.
The published draft revised Guiding Catalogue (“Guiding Catalogue 2023 edition”) is amended based on the current Guiding Catalogue revised on 30 December 2021 (“Guiding Catalogue 2019 edition”), with a total of 1,002 items, including 348 items in the encouraged category, 231 items in the restricted category, and 423 items in the obsoleted category. Compared with the Guiding Catalogue 2019 edition, the total number of items decreased by 476, the encouraged category decreased by 473, the restricted category increased by 16, and the obsoleted category decreased by 19.
According to Article 18 of the Interim Provisions, a project in the category of encouragement shall be examined, approved or recorded by relevant regulations; financial institutions shall provide credit support by the principle of credit; and implementation of relevant preferential policies shall be under relevant state regulations. Although the number of the encouraged items in the Guiding Catalogue 2023 edition has decreased, the direction of encouragement is more focused on the following four aspects: 1) Promoting the high-end, intelligent and green manufacturing industry by promoting the transformation of industrial technology and the transformation of the manufacturing industry model with intelligent manufacturing as the main direction, encouraging green technology innovation and the development of green and environmental protection industries, and promoting energy conservation and carbon reduction and green transformation in key areas.2) Consolidating the leading position of advantageous industries by accelerating the development of the digital economy and laying out future industries in advance, consolidating and improving the production capacity of grain and important agricultural products and strengthening the support of agricultural technology and equipment, accelerating the development of the internet of things and building an efficient and smooth logistics circulation system, and optimizing the integration of infrastructure in terms of layout, structure, function and systems.3) Speeding up the filling of shortcomings in areas related to security development by accelerating the reengineering of the industrial base and the breakthrough of major technical equipment to enhance the ability to guarantee the supply of strategic resources, strengthening the construction of security capabilities in key areas to enhance the impact resistance of the industrial system and ensure the security of food, energy resources and supply chains of important industrial chains.4) Building a new service industry system with advantages and high efficiency by promoting the deep integration of the modern service industry with the advanced manufacturing industry and modern agriculture, accelerating the development of R&D design, modern logistics, legal services and other service industries, accelerating the digitalization of the service industry, and accelerating the development of health, elderly care, childcare, culture, tourism, sports, housekeeping and other service industries to strengthen the supply of public welfare and basic service industries.
According to Article 18 of the Interim Provisions, a project in the category of restriction needs to be reformed and reinvestment is prohibited because it is with backward technology or product; it is not able to receive loans from financial institutions; and relevant government authorities including the departments of land management, environmental protection, quality inspection, fire protection, customs and administration for market regulation will refuse to handle the relevant formalities for it. Compared with the Guiding Catalogue 2019 edition, the category of restriction in the Guiding Catalogue 2023 edition adds two industries of construction and fire protection. The former involves 13 items, while the latter contains one item.
According to Article 19 of the Interim Provisions, a project in the category of obsolescence shall be obsoleted within a prescribed time limit, and all financial institutions should stop various forms of credit support and take measures to recover the loans that have been issued to it. Compared with the Guiding Catalogue 2019 edition, the category of obsolescence in the Guiding Catalogue 2023 edition adds one industry of construction which includes eight outdated production processes and one outdated product. As discussed above, they should be automatically included in the prohibited category of the Negative List.
The Guiding Catalogue 2023 edition reflects China's macro-industrial planning and is an important reference for predicting China's future development. The deadline for comments is 14 August 2023.