Provisions on Guiding the Orientation of Foreign Investmentdemonstrates Chinese government's industrial policies toward foreign investment. In The Provision, projects with foreign investment fall into 4 categories, namely encouraged, permitted, restricted and prohibited ones.

The Projects with foreign investment that are encouraged, restricted and prohibited shall be listed in theGuidance Catalog of Industry with Foreign Investment. And the projects with foreign investment that don't fall into the categories of encouraged, restricted or prohibited projects shall be the permitted projects with foreign investment. The permitted projects with foreign investment shall not be listed in theGuidance Catalog of Industry with Foreign Investment.

1. A project in any of the following situations shall be listed as the encouraged projects with foreign investment:

1) being of new agriculture technologies, agriculture comprehensive development, or energy, transportation and important raw material industries;

2) being of high and new technologies or advanced application technologies that can improve the product performance and increase the technology economic efficiency of the enterprises or those that can produce the new equipments and new materials which the domestic production capacity fails to produce;

3) meeting the market needs and being able to improve the product level, develop new markets or increase the international competitive capacity of the products;

4) being of new technologies and new equipments that can save energy and raw material, comprehensively utilize resources and regenerate resources, and prevent environment pollutions;

5) being capable of bring into the advantages of human power and resources of the mid-west region into full play and being in conformity to the industrial policies of the State;

6) other situations as provided for by laws and administrative regulations.

2. A project in any of the following situations shall be a restricted project with foreign investment:

1) being of technology lagged behind;

2) being adverse to saving resources and improving environment;

3) engaged in the prospecting and exploitation of the specific type of mineral resources to which the State applies protective exploitation;

4) falling into the industries that the State opens step by step;

5) other situations as provided by laws and administrative regulations.

3. A project in any of the following situations shall be a prohibited project with foreign investment:

1) harming the State safety or impairing the public interests;

2) polluting the environment, damaging natural resources or harming human health;

3) occupying too much farmland and being adverse to the protection and development of land resources;

4) harming the safety and usage of military facilities;

5) using the particular techniques or technologies of China to produce products;

6) other situations as provided for by laws and administrative regulations.

4. Apart from enjoying the preferential treatments according to the provisions of the relevant laws and administrative regulations, the encouraged projects with foreign investment that engage in the construction and operation of energy, transportation, municipal infrastructure (coal, oil, natural gas, electric power, railways, highways, ports, airports, city roads, sewage disposition, and garbage disposition, etc.) that needs large amount of investment and long term for recovery may expand their relevant business scope upon approval.

5. The permitted projects with foreign investment of which the products are all directly exported shall be regarded as the encouraged project with foreign investment; the restricted projects with foreign investment of which the export sales accounts for more than 70 percent of their total amount of sales may be regarded as the permitted projects with foreign investment upon the approval of the people's governments of provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan or the competent department under the State Council.

6. The conditions may be eased for the permitted and restricted projects with foreign investment that really can bring the advantages of the mid-west region into full play; among which, those listed in the Guidance Catalog of Industry with Foreign Investment may enjoy the preferential policies for the encouraged projects with foreign investment.

7. Chinese government adopt the approach of “pilot projects first, further enlargement standardized to expand step by step” in the opening of service industry. In accordance with china's economic development level and its promise when entering to WTO, China has started the orderly opening of service fields as banking, insurance, commerce, foreign trade, tourism, telecommunication, transportation, accounting, auditing and law services, etc.

Source: the State Council