Shanghai FTZ reveals stance on strategic sectors

The Shanghai Free Trade Zone’s negative list shed further light on which sectors the Chinese government views as strategically important, and hence which are likely to benefit from government protection and support, Fitch Ratings says in a research note on Tuesday.

Fitch expects the government to maintain a tight grip over the sectors on the negative list - the highly strategic sectors - while other sectors could see more liberalization and reform.

“We expect the government to maintain a controlling stance over the negative list sectors which the State views as strategic and important to national security and that only very slow and conservative reforms are likely in the medium term,” said Wang Ying, a Shanghai-based director with Fitch.

“We believe that the publication of these lists, the first of their kind in China, has improved transparency; as national guidelines have previously been vague and inconsistently interpreted.”

The negative list comprises hundreds of foreign investment restrictions in 18 sectors. Conversely, off-list sectors will only be subject to post-filing requirements, rather than the requirement to seek regulatory approval from the Ministry of Commerce and the National Development and Reform Commission.

Fitch expects the government to evaluate the effect of the negative list within 12 months and make adjustments in 2014 and onwards as the experiment with the Shanghai Free Trade Zone progresses.