In this article, we explore the key measures outlined in the plan and the broader implications for foreign investors since the successful holding of the Two Sessions.
The 2025 National Two Sessions (NPC & CPPCC) concluded with a resolute commitment to 5% GDP growth and a landmark focus on foreign investment stabilization. Against the backdrop of global economic uncertainties, China is rolling out its most investor-friendly policy package in a decade. For multinational enterprises, this represents a strategic window to align with China’s next-phase reforms while securing first-mover advantages in key sectors.
Hongda’s analysis of the 2025 Foreign Investment Stabilization Action Plan reveals how these policies translate into tangible opportunities – from manufacturing liberalization to financial deregulation.
1. Full Removal of Restrictions on Foreign Investment in the Manufacturing Sector
The Chinese government’s decision to eliminate all foreign investment restrictions in manufacturing marks a historic shift. Under the revised 2025 Foreign Investment Negative List, which reduces restricted sectors by 40% compared to 2021, foreign manufacturers now enjoy:
- Equal market access with domestic firms in non-listed industries
- Full ownership rights without mandatory joint venture requirements
- Policy parity in subsidies, land allocation, and R&D tax credits
This reform directly supports China’s “High-End Manufacturing 2025” strategy. For example, Tesla’s wholly owned Shanghai Gigafactory – which achieved 90% local part sourcing within 3 years – demonstrates how foreign manufacturers can leverage these policies to build vertically integrated supply chains.
2. Expansion of Pilot Programs for Restricted Sectors
China is adopting a “test-then-scale” approach to open sensitive sectors through controlled pilots:
- Value-Added Telecom: Foreign firms can now hold 51% stakes in cloud computing services in Beijing/Shanghai pilot zones (e.g., Microsoft Azure’s expanded China operations).
- Biotechnology: Foreign-owned R&D centers in Suzhou BioBay enjoy 5-year corporate tax exemptions for gene therapy innovations.
- Healthcare: Wholly foreign-owned hospitals in Hainan FTP receive 50% tariff rebates on imported medical equipment.
The government has established 24/7 multilingual investor hotlines in pilot zones to resolve licensing delays, with guaranteed 15-working-day approval for qualified projects.
3. Optimizing the National Service Sector Pilot Expansion
Building on the success of the China (Beijing) Free Trade Pilot Zone – which attracted $18 billion FDI in 2023 – the service sector reforms focus on extending th “One Policy, Multi-Zone Replication” mechanism:
- Cross-border data flow protocols enabling foreign fintech firms to process overseas transactions
- Streamlined licensing for international vocational education providers
- Mutual recognition of foreign professional qualifications in engineering and architecture
4. Expanding the Scope of Encouraged Foreign Investment Industries
The 2025 Catalogue of Encouraged Industries introduces targeted incentives:
Advanced Manufacturing Focus
- Integrated Circuits: 10-year corporate tax holidays for wafer fabrication plants in Xi’an/Shenzhen
- New Energy Vehicles: 30% equipment purchase subsidies for battery component factories
Regional Development Drivers
- 50% land cost discounts for factories exceeding ¥1 billion investment
- Fast-tracked environmental approvals (60 days vs standard 180 days)
5. Lifting Restrictions on Domestic Loans for Foreign Investment Companies
The removal of domestic financing barriers fundamentally reshapes capital strategies:
- Foreign-invested enterprises (FIEs) can now use RMB loans for M&A activities (previously restricted to operational expenses)
- Multinationals establishing regional HQs in China qualify for PBOC’s 2.75% preferential loans – 1.5% below standard rates
6. Implementing the Free Trade Zone Enhancement Strategy
China’s FTZ upgrades prioritize Hainan FTP as the flagship.
- Zero-Tariff Trade: Production equipment imports for healthcare/tourism projects are 100% duty-free
- Data Mobility: Pre-approved companies can transfer R&D data overseas within 24 hours (vs 30-day national security reviews)
- Talent Incentives: Foreign executives enjoy 15% capped personal income tax – less than half the standard top rate
Simultaneously, existing FTZs like Shanghai are testing blockchain-based customs clearance, reducing documentation time by 70%.
7. Enhancing Trade Facilitation for Foreign Enterprises
The 2025 trade facilitation package delivers concrete efficiency gains:
AEO Certification Advantages
- Customs Clearance: 0.5 days for certified firms vs 3-5 days standard
- Inspection Rates: Reduced from 5% to 1% for AEO holders
IP Protection Mechanisms
- Rapid Response: Customs can detain suspected counterfeit shipments within 48 hours of rights-holder notification
- Judicial Backing: 15 new IP courts with foreign judge consultants ensure cases conclude within 6 months
Conclusion: A Calculated Entry Point for Strategic Investors
China’s 2025 foreign investment framework is not merely policy adjustment but a systemic reinvention of its engagement model with global capital. The interplay of manufacturing access, service sector innovation, and financial deregulation creates a multi-layered opportunity matrix.
For investors, the imperative is clear:
- Audit Existing China Operations against new ownership/financing rules
- Engage Local Partners to navigate pilot zone complexities
- Leverage Regional Incentives in central/western development corridors
As China recalibrates its economic engines, those who strategically align with these reforms will secure decisive advantages in the world’s second-largest economy.
