On May 31, 2016, the State Council promulgated the Decision on the Temporary Adjustment of the Relevant Administrative Examination and Approval Matters and Special Access Management Measures for Hong Kong and Macau Service Providers in the Mainland (hereinafter, the “Decision”). Pursuant to the Service and Trade Agreement for A Closer Relationship Arrangement Between the Mainland and Hong Kong, and the Service and Trade Agreement for A Closer Relationship Arrangement Between the Mainland and Macau (hereinafter, the “Agreements”), the State Council has decided to further deregulate trade and service domains service providers to Hong Kong and Macao. The Decision went into effect on June 1, 2016.
The policy is primarily aimed at reducing the administrative rules on market entry. Except for the establishment of and changes to companies or other business organizations in telecommunications, culture, finance and other fields, Hong Kong and Macau service providers establishing a company in the Mainland and subsequent amendments will change to a recordation administration system, and the relevant rules on the contracts and bylaws relating to the establishment and subsequent amendments of foreign investment enterprises are now temporarily suspended. Meanwhile, the Decision also makes adjustments to special administrative supervisory measures to market entry, such as certain administrative approvals, qualification requirements, shareholding percentage restriction and business scope restriction. The details are as below:
1. Telecommunications industry
Certain adjustments were made to the Provisions on the Administration of Foreign-invested Telecommunications Enterprises to allow Hong Kong and Macau service providers to engage in the Mainland the telecommunications businesses enumerated in the respective Agreements. The specific administrative measures will be prescribed by the industry and information authorities under the State Council.
2. Ocean shipping industry
Pursuant to relevant provisions of the Regulations of the People’s Republic of China on International Shipping, business such as international shipping and international shipping agencies may not be exclusively operated by foreign-owned enterprises; they may only be operated as Sino-foreign joint ventures or Sino-foreign cooperative enterprises with foreign shareholding capped at 49%. However, the Agreements change the above rule for Hong Kong and Macao service providers and allow them to engage in the Mainland the shipping services enumerated in the respective Agreements.
3. Education industry
Under Article 62 of the Regulations of the People’s Republic of China on Sino-foreign Cooperative Education, foreign educational institutions, other organizations or individuals may not unilaterally set up schools or other educational institutions within the territories of China which primarily enroll Chinese citizens. The Agreements change the above rule for Hong Kong and Macao service providers and allow them to establish in the Mainland non-degree vocational skill training businesses pursuant to the respective Agreements.
4. Performance management industry
Article 11, Paragraph 1 of the Regulations on the Administration of Commercial Performances already allows the establishment of joint venture, cooperative or sole proprietorship performance management institutions, performance venue management institutions and their affiliates in the Mainland. The Agreements further allow Hong Kong and Macao service providers to invest in and set up locally controlled joint venture cultural and artistic performance groups in the Mainland. In addition, Chinese citizens who are permanent residents in Hong Kong and Macau may set up individual businesses to engage in manager work for individual performers without going through foreign investment examination and approval.
5. Entertainment industry
Under Article 6 of the Regulations on the Administration of Entertainment Venues, foreign investors may not be the sole proprietors of entertainment venues. However, the special administrative supervisory measures to market entry are temporarily adjusted to allow Hong Kong and Macau service providers to set up sole-proprietorship entertainment venues in Guangdong Province, and the People’s Government of Guangdong Province shall be responsible for drafting the specific administrative measures.
6. Economic and technology industry
The relevant provisions in the Circular of the General Office of the State Council Concerning the Strengthening of the Administration on Convening Foreign Economic and Technological Exhibitions Within the Territories of China are adjusted to allow service providers from Hong Kong and Macau service providers to convene and provide in the Mainland the meetings and exhibition services under the respective Agreements.
7. Civil aviation industry
The Provisions on Foreign Investment in the Civil Aviation Industry provide that foreign investment involving the maintenance and repair of aircraft and aviation fuels shall be controlled by Chinese investors. However, it is temporarily allowed for Hong Kong and Macau service providers to engage in the Mainland the air transportation support services under the Agreements.