Beijing’s Service Sector: Market Opening Measures

March 8, 2018 Posted by China Briefing Reading Time: 3 minutes

By I-Ting Shelly Lin

In late 2017, the Beijing Municipal Commission of Commerce announced several new temporary regulation adjustments aimed at loosening restrictions on foreign investment in the city. The adjustments, which are effective from December 22, 2017 to May 5, 2018, are designed to further open Beijing’s service sector to international investment.

The adjustments lower qualification standards for foreign investors and broaden the scope of permitted business activities in several service industries, including culture and education, business and tourism, science and technology, healthcare, and finance. After the May 5 deadline, authorities will study the pilot program and determine whether to keep or amend the measures.

The adjustments follow other recent policies aimed at bolstering Beijing’s service sector, namely June 2017’s Pilot Plan of Deepening Reform of Advancing Opening up of Beijing’s Service Industry (Guo Han [2017] No.86) and May 2015’s General Plan of Expanding Opening up of Beijing’s Service Industry (Guo Han [2015] No.81).

The latest adjustments are a legal guarantee for the 10 guidelines introduced in the 2017 Pilot Plan, and amend some of the Pilot Plan’s contents by further liberalizing the service sector. The latest measures include:

Permitting foreign investors to establish exclusively foreign-funded performance groups, business entities, and entertainment venues with no restriction on the investment proportion of Chinese parties in certain commercial areas;
Permitting foreign-owned banks to apply to conduct business in RMB and to open a business in China at the same time; foreign-owned banks no longer have to meet the requirement of having operated a business in China for more than a year;
Permitting foreign investment in civil aviation sales agencies;
Permitting foreign investment in audiovisual business production;
Lifting the restriction on the proportion of foreign technicians employed in foreign-invested construction and design enterprises ;
Lifting barriers for foreign investors to enter the human resources industry;
Reducing the threshold of foreign investment access to investment companies and talent agencies;
Encouraging collaborations between law firms in Hong Kong, Macau, Taiwan, and foreign countries; and
Authorizing drug makers to perform clinical trials of foreign-developed drugs.

In addition to the above measures, in January Beijing committed to greater promotion of its service sector by issuing the Suggestions for Further Promoting the Innovation and Development of the Exhibition Industry (the Suggestions). Municipal authorities issued the Suggestions to further establish the “four centers” concept, which seeks to promote Beijing as a center for politics, culture, international relations, and technology innovation.

Furthermore, Beijing has emphasized six aspects to strengthen the “four centers”. Namely, the six aspects consist of optimizing spatial layout and environment development, strengthening Beijing city’s brand building, cultivating market subjects, innovating development models, and promoting globalization.

A key consideration of the new measures is also aimed at improving citizens’ daily lives and encouraging consumption, such as in the culture and healthcare industries. Dragon Legend, for instance, has capitalized on recent liberalizations in Beijing’s service sector to become Beijing’s first exclusively foreign-owned performing arts company.

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Official statistics show that during the first three quarters of 2017, service industries’ value added represented 82 percent of Beijing’s total GDP. This trend is not limited to Beijing: the service sector is driving foreign investment throughout China. From January to November last year, total actual use of foreign investment in China totaled more than US$24 billion, up 87 percent from the previous year, primarily on the back of service industries.

Analysts believe that Beijing’s service sector restrictions will gradually continue to be lifted, as the city deepens its transition into a post-industrial economy. The serial measures announced recently are signals that Beijing is further promoting its service sector, as the city’s industrial functions are being shifted to neighboring areas such as Xiong’an and Hebei province. Beijing’s service industry – especially internet-based businesses – are poised to continue to outperform other sectors in 2018, representing the majority of the city’s GDP growth.

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