Soft drinks makers and some edible oil producers look set to be penalised under new investment regulations as the Chinese Government issues restrictions on overseas investors and companies.
While China is encouraging investment in infrastructure and technology from various beverage manufacturers, it seems the majority stake of any venture for producers of well-known liquor will have to be in Chinese hands.
The US Government also notes that restrictions to cover all carbonated berverage production rather than just local brands has been extended.
But overseas producers of natural food additives and food ingredients are being encouraged to come to China. Companies that fall into this category are often eligible for tax incentives and other benefits, a US Government report said.
China's Industrial Catalogue for Foreign Investment has been amended with its new regulations coming into force on 1 December. This important policy document provides guidance for investments that the Chinese Government favours, discourages or bans.
The release of the catalogues serves as a signal to government ministries to implement changes in the investment regime.
The policy is divided into three categories. The first is Encouraged Investment. The second is Restricted Investment, with a common method being a cap on ownership of firms. The final category is Banned Investments.
New Encouraged Areas include the development and production of:
1. Edible oils and spices
2. Vegetables (including edible mushrooms and melon), tea cultivation technology
3. Sugar, fruit trees, and forage crops
4. Coffee cultivation
5. Aquaculture- but this is limited to joint ventures only
Manufacturing
Food processing industry
1. Biological feed, straw, fodder, and the development of aquatic feed production
2. Aquatic and shellfish products processing and development of seaweed functional foods
3. Vegetables, storage, and livestock products processing
Food industry
1. Functional food for infants and elderly people
2. Natural food additives and food ingredients production (limited to joint ventures, cooperation)
Beverage manufacturing
1. Fruit and vegetable drinks, protein drinks, tea drinks, coffee beverages, beverage plant development and production
Restrictions on Foreign Investment
Manufacturing
1. Soybeans and rapeseed edible oil processing -where the Chinese side must hold controlling share
Beverage manufacturing
1. Rice wine and famous liquor production-where the controlling stake must be Chinese
2. Carbonated beverage production
Wholesale and retail trade
Restriction on foreign investment to a minority stake in retailers, wholesalers and distributers with over 30 outlets that sell grain, cotton, vegetable oil, or sugar.
Banned Investments
The development and production of genetically modified plants and animals by foreign companies is banned in China.