Regional Round-Up: China Q4 2024 (Year in Review Edition)

Despite the complex and challenging environment, China’s economy has remained stable as a whole, with both quantitative growth and improvement, showing strong resilience and vitality in 2024.

China has been making strenuous and coordinated efforts to attract foreign investment by both relaxing and lifting market access restrictions for foreign investments, and refining the overall business and regulatory environment, so as to fulfill its commitment to accelarate the pace of market-opening reforms. On 8 September 2024, China released the Special Administrative Measures (Negative List) for Foreign Investment Access (2024 Edition) (外商投资准入特别管理措施(负面清单) (2024年版, “2024 Negative List“), which notably removes all restrictions on foreign investment in China’s manufacturing sector and commits to the further opening of critical service sectors, including telecommunications, education, and healthcare. One day before the release of the 2024 Negative List, China launched pilot programs in line with these reforms, via the Notice on Carrying out the Pilot Program for Expanding Opening-up in the Medical Field (MOFCOM [2024] No. 568) (关于在医疗领域开展扩大开放试点工作的通知), allowing foreign investment in cell and gene therapy across four free trade zones and permitting the operation of wholly foreign-owned hospitals in eight major cities (including Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou and Shenzhen) and one province (i.e. the whole Hainan Island). Furthermore, on 23 October 2024, another pilot program was introduced, allowing 100% foreign ownership of data centres and value-added telecommunications services in four places (i.e. Beijing, Shanghai, Hainan and Shenzhen) as the pilot areas for expanding the opening-up of value-added telecommunications services (增值电信业务扩大对外开放试点). These substantial relaxations in market access open up new prospects for foreign investors, especially in China’s booming biotech, healthcare, and telecommunications industries, and also reinforce China’s endeavours to attract high-quality foreign investments in key industries. Meanwhile, the release of the draft amendment to the Anti-unfair Competition Law (反不正当竞争法) on 21 December 2024, as well as the issuance of the Guidelines on Antitrust Compliance for Business Operators (经营者反垄断合规指南) on 25 April 2024, also demonstrate China’s determination to further regulate market operations and improve the business environment.

In line with the relaxation of requirements for foreign investment access as reflected in the 2024 Negative List, the latest substantial amendments to the People’s Republic of China (“PRC”) Company Law (“New PRC Company Law”), first published in December 2023, came into force on 1 July 2024, further improving the governance and regulation of companies (including foreign-invested enterprises). On the effective date of the New PRC Company Law, China’s State Council issued the Provisions on the Implementation of the Registered Capital Management System under the Company Law of the People’s Republic of China (in Chinese 国务院关于实施《中华人民共和国公司法》注册资本登记管理制度的规定) which provide clarifications on how the capitalisation requirements under the New PRC Company Law are to be implemented. On 30 December 2024, China promulgated the Company Registration Management Implementation Measures (公司登记管理实施办法) to implement the Amended Company Law and related administrative regulations, which addressed prominent concerns such as adjusting the timeframe for registered capital contributions, resolving challenges in company deregistration, and preventing false registrations.

In 2024, numerous developments were also seen in the realms of cybersecurity and data protection legislation, regulation, and enforcement, with a particular focus on cross-border data transfer and personal information protection. In an effort to improve the business environment, China’s cybersecurity authorities have eased requirements on multinationals and foreign companies. On 22 March 2024, China released the Regulations on Promoting and Regulating the Cross-border Data Flow (促进和规范数据跨境流动规定), which provide several measures that facilitate cross-border data transfer for companies in China, greatly easing compliance burdens and allowing for the free flow of data in certain scenarios. Subsequently, In May and August 2024, the Tianjin Free Trade Zone, the Lingang New Area in Shanghai and the Beijing Free Trade Zone issued special measures in relation to the cross-border transfer of data, respectively, to further ease or simplify the export of data outside China. On 30 September 2024, China issued the new Administrative Regulations for Network Data Security (网络数据安全管理条例), which, among others, establish a comprehensive framework for the management and protection of important data and introduce specific guidelines for data processors wishing to transfer personal information outside China.

The business environment in and outside China has grown increasingly complex in recent years and the Chinese government has made efforts to both improve its business environment and protect the national interests. It is crucial for foreign investors to understand the key risks such as geopolitical tensions, economic shifts, regulatory challenges, etc. when they decide to invest in China.