China lifting foreign investment restrictions in special trade zone

BEIJING—China is lifting restrictions on foreign investment for several industries, from green tea to civil airplane engines, in a special free trade zone in the business hub of Shanghai.

The new rules affect 27 industries, also including automobiles and infrastructure, and represent a mix of concessions over the rules that apply elsewhere on the mainland.

Some of the limits on industry investment by foreign companies in joint ventures with Chinese firms will go from 49 per cent to 51 per cent or greater, including in the shipping industry, China’s State Council said on its website.

In some other industries, such as companies developing high-speed rail technology, passenger trains, yachts and luxury liners, sole foreign ownership will be allowed in the Shanghai zone, whereas elsewhere in China the firms must have a local partner, the statement said. Foreign companies producing traditional Chinese tea will be allowed in the Shanghai zone under joint ventures, whereas elsewhere they are not allowed at all, the statement said.

The Chinese government under President Xi Jinping has acknowledged the need for long-term reforms of the country’s slowing economy to shift away from a model based on trade and investment in factories.

Piecemeal changes so far have included easing controls on bank lending and the free-trade zone established in Shanghai in September 2013.

But Beijing has yet to tackle fundamental changes such as curbing the dominance of state companies that the previous generation of leaders spent the past decade building up.