In August 2024, the Chinese government made a groundbreaking move by eliminating all restrictions on foreign investment in the manufacturing sector. This decision represents a significant milestone in China’s journey towards greater openness to the global economy. The policy shift from “basic foreign investment openness” to “comprehensive openness” carries profound historical and practical significance. This article explores the specifics of this policy, the reasons behind it, and its far-reaching effects on economic and trade relations between China and Vietnam.
Understanding China’s Removal of Manufacturing Foreign Investment Restrictions
1.1 Key Points of the Policy
On August 19, under the leadership of Premier Li Qiang, the State Council Executive Meeting approved the “Special Administrative Measures for Foreign Investment Access (Negative List) (2024 Edition),” announcing the removal of all restrictions on foreign investment in manufacturing nationwide. This policy marks a decisive step towards fully opening China’s manufacturing sector to foreign investors. The “zeroing out of the manufacturing negative list” expands from the free trade zones to the entire country.
The so-called “Negative List for Manufacturing” refers to a reverse approach to promising market access to foreign investment. It specifies industries and businesses where foreign investment is restricted or prohibited, and these sectors do not offer pre-entry national treatment to foreign investors. For industries and businesses not included in the negative list, foreign and domestic investments are treated equally. Simply put, apart from the “restricted zones” listed on the negative list, all other industries, fields, and economic activities are open to investment. According to the new policy, unless explicitly listed in the “Special Administrative Measures for Foreign Investment Access (Negative List) (2024 Edition),” all manufacturing industries and sectors are open to foreign investment, and foreign enterprises will enjoy the same pre-entry national treatment as domestic enterprises. This measure aims to provide greater convenience for foreign investment in China’s manufacturing sector, promoting the transformation, upgrading, and high-quality development of China’s manufacturing industry.
1.2 Background and Reasons for the Policy
Over the past decade, China has achieved considerable success in attracting foreign investment, but it has also faced growing challenges recently. According to the Ministry of Commerce, the actual use of foreign capital in China amounted to 539.47 billion yuan as of July 2024, a 29.6% decrease year-on-year due to a high base in the previous year. Meanwhile, the “World Investment Report 2024” from the United Nations Conference on Trade and Development (UNCTAD) showed that global FDI inflows reached $700 billion in the first half of 2024, down about 15% year-on-year.
Global Share of China’s Actual Use of Foreign Direct Investment (FDI) from 2018 to 2023
| Year | Global FDI | China’s Actual Use of FDI | |||
| Amount (Trillion USD) | Year-on-Year Growth Rate | Amount (Trillion USD) | Year-on-Year Growth Rate | Share of Global FDI | |
| 2018 | 1.38 | -16.4% | 138.31 | 1.5% | 10.1% |
| 2019 | 1.71 | 24.2% | 141.22 | 2.1% | 8.3% |
| 2020 | 0.96 | -43.7% | 149.34 | 5.7% | 15.5% |
| 2021 | 1.48 | 53.7% | 180.96 | 21.2% | 12.2% |
| 2022 | 1.29 | -12.4% | 189.13 | 4.5% | 14.6% |
| 2023 | 1.33 | -1.7% | 163.25 | -8.0% | 12.3% |
Data Sources: United Nations Conference on Trade and Development (UNCTAD), China’s Ministry of Commerce, compiled by Vanzbon.
This decline is mainly due to increasing global economic uncertainty, rising geopolitical risks, and trade tensions among major economies, reflecting a slowdown in foreign investment worldwide. Despite this, nearly 32,000 new foreign-invested enterprises were established in China by July, up 11.4% from the previous year, continuing the growth trend from 2023. This indicates that foreign investors remain optimistic about their long-term prospects in China. In this context, China introduced the policy to further optimize its business environment and enhance its appeal to foreign investors.
1.3 China’s Global Strategy
From an investment structure perspective, in January-July 2024, the share of foreign capital in China’s manufacturing and high-tech manufacturing sectors increased by 2.9 and 2.6 percentage points, respectively, compared to the same period in 2023. This reflects a continuous optimization of the investment structure, suggesting that foreign investors are actively adjusting their investment strategies in line with China’s push for new industrialization and advanced productivity. Regarding foreign enterprises’ performance, data from the National Bureau of Statistics show that in the first half of the year, profits of foreign-funded large-scale industrial enterprises rose by 11%, outperforming the national average of 3.5%. A report by the American Chamber of Commerce in South China also revealed that most surveyed companies believe they achieve high returns on investment in China, with 90% of American firms being profitable, indicating that foreign businesses are not only entering China but thriving. This is a strong incentive for multinational companies to continue investing in China.
As the world’s largest manufacturing powerhouse and biggest trader of goods, China plays a critical role in the global economy. The removal of foreign investment restrictions in manufacturing signifies a deeper commitment to opening up in the globalized world. By attracting more high-quality international resources and capital, China aims to drive high-quality development and optimize the structure of its manufacturing sector. The policy’s implementation is expected to attract more international capital to the Chinese market, fostering transformation and upgrading of China’s manufacturing industry and enhancing its position and competitiveness in the global industrial chain.
Impact of the Policy on China’s Economy
2.1 Effects on China’s Manufacturing Industry
In the short term, opening up the manufacturing sector to foreign investment will likely intensify competition in China’s domestic market, particularly in high-tech and high-value-added sectors. The entry of foreign enterprises will create competitive pressure on domestic small and medium-sized enterprises (SMEs), pushing them to enhance their technological capabilities and innovation. This competition will also help weed out less competitive businesses, accelerating the industry’s overall improvement.
In the long run, the removal of foreign investment restrictions will help China’s manufacturing industry better integrate into global resource allocation, promoting its transition from a “manufacturing giant” to a “manufacturing powerhouse.” Following the policy, increased foreign capital inflows are expected to optimize the industrial structure, enhance the value of the supply chain, and foster technological exchange and collaboration between Chinese and foreign companies, strengthening their global competitiveness. In recent years, foreign investment in China has primarily targeted high-tech manufacturing and green industries, which are expected to drive the transformation and upgrading of China’s manufacturing sector.
2.2 Effects on China’s Service Industry
Moreover, the State Council Executive Meeting emphasized accelerating the opening of service sectors such as telecommunications, education, and healthcare. Earlier in August, the State Council released the “Opinions on Promoting High-Quality Development of Service Consumption,” which also called for expanding the opening of the service industry, specifically in telecommunications, education, medical care, and health. Further opening these sectors to foreign investment will help enhance the quality of service consumption in China.
Assistant Minister of Commerce Tang Wenhong stated that expanding the opening of the service industry is problem-oriented, addressing the lack of high-quality service supply and public concerns about service quality. By opening the service sector further, the government hopes to enhance service supply capacity and service levels, thereby expanding service consumption. The entry of world-class service enterprises into the Chinese market will provide consumers with more high-quality services, stimulate business vitality, and strengthen the link between domestic and international markets and resources, contributing to high-quality economic growth.
Implications for Sino-Vietnam Economic and Trade Cooperation
3.1 Boosting Bilateral Investment Between China and Vietnam
China’s removal of restrictions on foreign investment in manufacturing provides Vietnamese companies with more opportunities to invest and cooperate. In recent years, China and Vietnam have strengthened their economic and trade ties, with China becoming one of Vietnam’s largest trading partners and sources of investment. Vietnamese companies can seize this opportunity to expand their investments and business in the Chinese market. According to the latest data from the Vietnam General Statistics Office, in the first half of 2024, Vietnam’s outward direct investment (ODI) amounted to $4.57 billion, with about 30% flowing into China, particularly in high-tech and green manufacturing sectors. With the increased openness of China’s manufacturing sector, Vietnamese companies will have more opportunities to enter the Chinese market and expand their investments and operations.
3.2 Promoting Integration of Sino-Vietnam Supply Chains
Removing foreign investment restrictions will also enhance supply chain integration between China and Vietnam. Vietnam, as a key partner in the ASEAN region, has maintained strong manufacturing cooperation with China. According to the latest data from the Vietnamese Ministry of Industry and Trade, the bilateral trade volume between China and Vietnam reached $87 billion in the first half of 2024, up 13.5% year-on-year. This policy will further deepen cooperation in supply chains and industries between the two countries, enhancing their market competitiveness and resilience to risks.
3.3 Strengthening Regional Economic Integration
China’s policy will promote economic and trade cooperation between China and Vietnam and positively impact economic integration in the ASEAN region. As China’s manufacturing sector opens further, more Vietnamese companies will have opportunities to enter the Chinese market, promoting economic cooperation and integration in the region. At the same time, the policy will increase cross-border investment and trade activities, strengthening ASEAN’s position in the global economy.
Challenges and Opportunities in Sino-Vietnam Economic and Trade Relations
4.1 Challenges: Navigating Market Competition and Technological Barriers
While China’s removal of restrictions offers Vietnamese companies more investment opportunities, they will also face challenges when entering the Chinese market. First, the Chinese market is highly competitive, requiring Vietnamese companies to improve product quality, pricing, and market positioning. Second, technological barriers pose another significant challenge. Although Vietnam’s manufacturing industry is growing rapidly, it still lags behind China in technological level and innovation capacity. Therefore, improving their technological capabilities and innovation is crucial for Vietnamese companies to establish a foothold in the Chinese market.
4.2 Opportunities: Leveraging China’s Market for Vietnam’s Manufacturing Upgrades
Conversely, China’s open-door policy also offers Vietnamese companies opportunities to upgrade their manufacturing capabilities by tapping into the Chinese market. Through cooperation with Chinese companies, Vietnamese businesses can learn from China’s advanced technologies and management practices, enhancing their industrial chain and added value. Meanwhile, Chinese companies, in their overseas investments, can utilize Vietnam’s geographical and labor cost advantages to achieve better market positioning and resource allocation.
Expected Outcomes and Future Prospects of Policy Implementation
5.1 Expected Outcomes: Elevating Sino-Vietnam Economic Cooperation to New Heights
The policy of removing foreign investment restrictions is expected to elevate Sino-Vietnam economic cooperation to a higher level. According to the latest data from Vietnam’s Ministry of Planning and Investment, China’s direct investment in Vietnam reached $2.85 billion in the first half of 2024, up 15.3% year-on-year. With the further deepening of China’s openness policy, the bilateral investment and trade volume between China and Vietnam is expected to grow rapidly, injecting new momentum into their economic cooperation.
5.2 Future Prospects: Strengthening Policy Coordination for Mutual Benefit
Moving forward, China and Vietnam should strengthen policy coordination to deepen and expand their economic and trade cooperation. Firstly, both sides should formulate more flexible and open policies in trade, investment, and industrial cooperation to encourage collaboration in more areas. Secondly, both countries should enhance coordination in regional and global economic governance to address international market challenges and risks. Lastly, China and Vietnam should strengthen cooperation in emerging areas such as technological innovation and green development to promote sustainable regional economic development.
Conclusion
Amid today’s complex global economic environment, China remains resolute in its commitment to opening up, with its doors set to open wider in the future. The 20th Third Plenary Session of the Party emphasized the need to adhere to the fundamental national policy of opening up, with specific requirements for steadily expanding institutional openness, deepening reforms in foreign investment and outbound investment management, and optimizing regional openness layout. This reiterates the Chinese government’s positive stance toward foreign investment, which has been well received by many foreign chambers of commerce and foreign companies in China.
China will continue to create a world-class, market-oriented, law-based, and internationalized business environment, reinforcing foreign investors’ confidence in the Chinese market and enhancing the quality and level of trade and investment cooperation. The removal of foreign investment restrictions in manufacturing is a crucial step towards greater openness, with profound impacts on both the Chinese and global economies. For Vietnam, this policy presents more investment opportunities and market space, fostering deeper economic and trade relations between China and Vietnam. In the future, China and Vietnam should continue to strengthen cooperation to promote regional economic integration and sustainable development, achieving the goal of mutual benefit.
Schedule：Foreign Investment Special Management Measures (Negative List) (2024 Edition)
| No. | Special Administrative Measures |
| I. Agriculture, Forestry, Animal Husbandry, and Fishery | |
| 1 | The shareholding ratio of the Chinese party in the breeding of new wheat varieties and seed production shall not be less than 34%. Corn breeding and seed production must be controlled by the Chinese party. |
| 2 | Investment in the research and development, breeding, planting, and production of China’s rare and unique precious species and their related breeding materials (including superior genes of agriculture, animal husbandry, and aquaculture) is prohibited. |
| 3 | Investment in the breeding of genetically modified crop varieties, livestock and poultry breeds, and aquatic fingerlings, as well as their genetically modified seeds (fingerlings), is prohibited. |
| 4 | Investment in the fishing of aquatic products in China’s jurisdictional waters and inland waters is prohibited. |
| II.Mining | |
| 5 | Investment in the exploration, mining, and beneficiation of rare earth, radioactive minerals, and tungsten is prohibited. |
| III.Electricity, Heating, Gas, and Water Production and Supply | |
| 6 | The construction and operation of nuclear power plants must be controlled by the Chinese party. |
| IV. Wholesale and Retail | |
| 7 | Investment in the wholesale and retail of tobacco leaves, cigarettes, reconstituted tobacco leaves, and other tobacco products is prohibited. |
| V. Transportation, Warehousing, and Postal Services | |
| 8 | Domestic water transportation companies must be controlled by the Chinese party. |
| 9 | Public air transportation companies must be controlled by the Chinese party. The investment ratio of a single foreign investor and its affiliated enterprises must not exceed 25%, and the legal representative must be a Chinese citizen. For general aviation companies, the legal representative must be a Chinese citizen, and in agriculture, forestry, and fishery general aviation companies, the investment is limited to joint ventures; other general aviation companies are limited to Chinese-controlled entities. |
| 10 | The construction and operation of civilian airports must be relatively controlled by the Chinese party. Foreign parties are not allowed to participate in the construction or operation of airport control towers. |
| 11 | Investment in postal companies and domestic express mail services is prohibited. |
| VI. Information Transmission, Software, and Information Technology Services | |
| 12 | Telecommunications companies: limited to the telecommunications services that China committed to opening up upon joining the WTO. The foreign investment ratio in value-added telecommunications services must not exceed 50% (excluding e-commerce, domestic multi-party communication, store-and-forward services, and call centers), and the basic telecommunications business must be controlled by the Chinese party. |
| 13 | Investment in internet news information services, online publishing services, online audiovisual program services, internet culture business (excluding music), and internet public information release services is prohibited (excluding content that China has committed to opening up in its WTO commitments). |
| VII.Leasing and Business Services | |
| 14 | Investment in Chinese legal affairs (except providing information about the Chinese legal environment) is prohibited. Foreign investors cannot become partners in domestic law firms. |
| 15 | Market research is limited to joint ventures, and radio and television listening and viewing surveys must be controlled by the Chinese party. |
| 16 | Investment in social surveys is prohibited. |
| VIII. Scientific Research and Technical Services | |
| 17 | Investment in the development and application of human stem cells, gene diagnosis, and treatment technologies is prohibited. |
| 18 | Investment in humanities and social science research institutions is prohibited. |
| 19 | Investment in geodetic surveying, marine surveying, aerial photography, mobile ground surveying, administrative boundary surveying, topographic maps, world political maps, national political maps, provincial and lower-level political maps, national teaching maps, local teaching maps, true 3D maps, and navigation electronic maps production is prohibited, along with regional geological mapping, mineral geology, geophysics, geochemistry, hydrogeology, environmental geology, geological disaster, and remote sensing geology investigations (work within the scope of mineral rights by mineral rights holders is not subject to this special management measure). |
| IX. Education | |
| 20 | Pre-school, ordinary high school, and higher education institutions are limited to Sino-foreign cooperative education and must be dominated by the Chinese party (the principal or main administrative officer must have Chinese nationality, and no less than half of the board of directors, board of trustees, or joint management committee members must be Chinese). |
| 21 | Investment in compulsory education institutions and religious education institutions is prohibited. |
| X. Health and Social Work | |
| 22 | Medical institutions are limited to joint ventures. |
| XI.Culture, Sports, and Entertainment | |
| 23 | Investment in news agencies (including but not limited to news agencies) is prohibited. |
| 24 | Investment in the editing, publication, and production of books, newspapers, periodicals, audiovisual products, and electronic publications is prohibited. |
| 25 | Investment in broadcasting stations, TV stations, broadcasting channels (frequencies), and broadcasting and television transmission coverage networks (transmitting stations, relay stations, broadcast television satellites, satellite uplink stations, satellite receiving stations, microwave stations, monitoring stations, and cable broadcast television transmission coverage networks) is prohibited, along with engagement in broadcasting and television video-on-demand services and satellite television broadcast ground receiving facility installation services. |
| 26 | Investment in companies that produce and operate radio and television programs (including import business) is prohibited. |
| 27 | Investment in film production companies, distribution companies, cinema chains, and film import businesses is prohibited. |
| 28 | Investment in auction companies, cultural relic shops, and state-owned cultural relic museums engaged in cultural relic auctions is prohibited. |
| 29 | Investment in performing arts troupes is prohibited. |
