Following the policy change lifting restrictions on foreign-invested hospitals and biochemistry research, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) of China released the “Special Administrative Measures for Foreign Investment Access (Negative List) (2024 Edition)” on the same day in September 2024. This new edition, which will come into effect on November 1, 2024, indicate a strong signal about China’s ongoing efforts to open up its economy and create a more favorable environment for foreign investors.
This article is particularly relevant for corporations and foreign investors in the mechanical industries. The recent policy changes present new opportunities for investment and collaboration, making it crucial for these corporations and investors to understand the implications and potential benefits.
The 2024 edition of the “Special Administrative Measures for Foreign Investment Access (Negative List)” has reduced the number of restrictive measures from 31 to 29. This reduction is part of China’s broader strategy to open up its economy and attract more foreign investment.
Two significant deletions from the list include:
1. Chinese Control in Publication Printing: The requirement for Chinese control in the printing of publications has been removed.
2. Traditional Chinese Medicine Processing Techniques: The prohibition on investment in the processing techniques of traditional Chinese medicine decoction pieces and the production of proprietary Chinese medicine products with confidential prescriptions has been lifted.
The removal of these restrictions marks the complete elimination of foreign investment restrictions in the manufacturing sector. This is a significant development for non-Chinese corporations in the mechanical industries, as it provides a more open and competitive environment for investment and collaboration. The changes are expected to foster innovation, enhance technological development, and improve the overall business climate in China.
Moreover, the policy is designed to align with China’s broader economic goals, including the transition towards high-tech and advanced manufacturing industries. This strategic focus is likely to result in increased collaboration between Chinese and foreign enterprises, facilitating knowledge transfer and the development of cutting-edge technologies.
The relaxation of foreign investment restrictions is poised to drive technological advancements, create new investment opportunities, and strengthen the intellectual property regime in China.
Firstly, the relaxation of foreign investment restrictions allows non-Chinese companies to expand the impact of advanced technologies in the world’s second-largest economy and benefit from the country’s development. With fewer barriers to entry, foreign companies can more easily introduce advanced technologies and expertise into the Chinese market. For instance, Siemens Energy signed a strategic cooperation agreement in 2014 with Chinese utility companies, including Huaneng Power and Shanghai Electric, to co-develop low-carbon technologies. This collaboration has enabled the local production of high-efficiency power generation units, supported clean energy development, and achieved sustainability, making Siemens a key strategic partner with China in this area to this day.
Moreover, the updated policy opens up numerous opportunities for foreign investors. Corporations can now engage more freely in joint ventures, partnerships, and wholly foreign-owned enterprises within China. A notable example is GE Aviation’s collaboration with AVIC, which has facilitated the development and production of advanced aircraft engines in China. This partnership has not only brought cutting-edge technology to the Chinese market but also allowed GE to leverage local expertise and resources, enhancing their global competitiveness and expanding their footprint in the rapidly growing Chinese aviation market.
Besides the complete elimination of foreign investment restrictions in the manufacturing sector, China encourages the development of low-carbon technologies. On August 23, 2024, China announced the suspension of its steel capacity replacement policy, which had been in place since 2013. This policy aimed to reduce overcapacity and promote energy-saving and low-carbon production methods. This pause provides an opportunity for the industry to regroup and adapt to new sustainability targets.
In summary, these examples illustrate the significant impact of technology transfers in the mechanical industries, enhancing local manufacturing capabilities, fostering innovation, and building expertise in advanced technologies, making China an increasingly attractive destination for foreign investment in the mechanical industries.
China has seen a significant increase in patent filings in recent years, particularly in the mechanical industry. According to the World Intellectual Property Organization (WIPO), China accounted for 46.8% of the world’s total patent applications in 2022, with approximately 1.62 million patent applications filed. This trend reflects the country’s growing emphasis on innovation and technological development.
Among these, the number of foreign-owned valid invention patents in China had risen by 3.9% year on year according to a CNIPA news report in August 2024. We expect a surge in patent activity driven by both domestic innovation and the influx of foreign technologies with the lifting of foreign investment restrictions.
Moreover, the focus on high-tech and advanced manufacturing will lead to an increase in patents related to automation, robotics, and new materials. These areas are critical for the mechanical industry as they drive efficiency, productivity, and sustainability.
The increase in patent filings is also supported by China’s improved intellectual property regime, which provides a more secure environment for protecting and commercializing innovations. This has encouraged both domestic and foreign companies to invest in R&D and file patents in China, further boosting the country’s position as a global leader in technological innovation.
The enhanced patent protection and commercialization environment significantly boost the attractiveness of the Chinese market for foreign investors. As China continues to open its economy and strengthen its IP regime, foreign companies in the mechanical industries can anticipate a more favorable and dynamic business environment.
To capitalize on these opportunities, foreign technology owners could focus on several key strategies.
By designing and implementing unique development and patent strategies tailored to China, foreign technology owners could effectively navigate the Chinese market and capitalize on the opportunities presented by the evolving policy and legal environment.
Policies published in China official websites:
https://english.www.gov.cn/news/202409/08/content_WS66dd6238c6d0868f4e8eabad.html
