MK sports -The logic behind the removal of the statement “banning gambling and pornography” from the negative list

In the early morning of July 1, the Shanghai Municipal Government announced the 2014 version of the negative list for the free trade zone. The number of special management measures in the new version of the negative list was reduced by 51 from 190 in the 2013 version to 139, a reduction of 26.8%.

        Nine months after the Shanghai Free Trade Zone was established, the 2014 version of the negative list was unveiled.

        At around 2 a.m. on July 1, the Shanghai Municipal Government announced the 2014 version of the free trade zone negative list – “Special Management Measures for Foreign Investment Access in the China (Shanghai) Pilot Free Trade Zone (Negative List) (Revised in 2014)”. The special management measures in the new negative list have been reduced by 51 items from the 190 items in the 2013 version to 139, a reduction of 26.8%.

        In addition to 14 substantive opening measures, the new negative list also includes a number of bans that are also applied to domestic companies, such as “prohibition on investment in the gambling and pornography industries.”

        Compared with the 2013 version of the negative list, the slimming logic of the 2014 version of the list has become apparent, which includes roughly three items: further expanding opening up, substantially canceling some clauses; merging many clauses into similar items due to adjustments in classification format; reflecting the consistency of domestic and foreign investment, deleting some items that have been prohibited by superior laws or other existing laws.

Logic 1: Further expand opening up, substantially cancel 14 articles, and substantially relax 19 articles

        The 14 management measures that have been substantially cancelled are not concentrated entirely in the service sector, but are evenly distributed, with seven management measures belonging to the service sector and seven to the further opening of other sectors such as manufacturing, which involve mining, marine engineering equipment and other fields.

        For example, the clauses in the oil and gas extraction industry that “investment in the development and application of new technologies to improve crude oil recovery and related technologies must be joint ventures or cooperation” and “investment in the development and application of new technologies for oil exploration and development such as geophysical prospecting, drilling, logging, well logging, downhole operations, etc. must be joint ventures or cooperation” have been cancelled; the clause “restriction on investment in electrolytic aluminum, copper, lead, zinc and other non-ferrous metal smelting” in the commonly used non-ferrous metal smelting has been cancelled. The clause “restriction on investment in the wholesale and distribution of vegetable oil and sugar” in the wholesale industry has been cancelled.

        The 19 management measures that have been substantially relaxed involve 9 in the manufacturing sector, 1 in the real estate sector, 1 in the infrastructure sector, 4 in the commercial services sector, 2 in the shipping services sector, 1 in the professional services sector, and 1 in the social services sector.

        For example, in the C153 refined tea processing, the original “investment in green tea processing with traditional Chinese technology is prohibited” was changed to “investment in green tea production and processing with traditional Chinese technology must be controlled by the Chinese side”. The original “investment in aircraft maintenance (with the obligation to undertake international maintenance market business) projects is limited to Chinese control” in G563 was cancelled. The original “investment in the repair of marine engineering equipment (including modules) must be controlled by the Chinese side” in C351 was cancelled.

Logic 2: “Merge similar items” caused by adjustment of classification method

        The 2014 version of the negative list is still compiled in accordance with the “National Economic Industry Classification and Code”, including 18 industry categories, but the subdivisions of the major and medium categories of the 2013 version have been cancelled, and the categories are uniformly replaced by “fields”.

        Because of this adjustment in classification, the 2014 version of the negative list has 23 fewer items than the 2013 version. In layman’s terms, these 23 items are actually “merged into similar items.”

        For example, in the 2013 negative list, the mining and exploration of “special and scarce coal types” were described in two separate articles, but in the new version of the negative list they were merged into one article.

        Similar items include marine engineering equipment manufacturing and maintenance, civil general aircraft design, manufacturing and maintenance, etc. In the 2013 version of the negative list, maintenance is often listed as a separate item because it belongs to different categories from manufacturing and design.

Logic 3: Reflect the consistency of domestic and foreign investment and cancel the “ban on investment in the gambling and pornography industries”

        It is worth mentioning that the new version of the negative list also deleted the statements “prohibiting investment in the gaming industry (including gambling racetracks)” and “prohibiting investment in the pornography industry”.

        An industry insider said that he believed the new version of the negative list deleted the above two statements because the above two items themselves have been prohibited by other superior laws in China.

        In other words, this type of policy is not only prohibited for foreign companies, but also for domestic companies, so there is no need to make a separate list for foreign companies.

        In addition, the restriction on foreign investment in “Internet access service business premises (Internet cafe activities)” has been substantially abolished. In the “R89 entertainment industry” field of the 2014 version of the negative list, there is now only one item left: “restriction on investment in the construction and operation of large-scale theme parks.”

        There are 14 items of this type that were cancelled in the 2014 version of the negative list because they have restrictions on both domestic and foreign investment.

        A Shanghai-based scholar who studies negative lists told The Paper that the 2014 version of the negative list is still a transitional list. “The opening up of some areas needs to be in line with the country’s major negotiation strategy as a bargaining chip. A considerable portion of the content is mainly concentrated in the manufacturing industry, and there is still room for further opening up.”-MK sports