The following is provided for information purposes, and not meant to be legal advice.
In China, there are four categories of foreign investment: (1) encouraged, (2) restricted, (3) prohibited, or (4) permitted.
Investors in encouraged industries may receive tax benefits, import capital equipment without duties, and receive local approvals. Such industries include: (1) design of integrated circuits, (2) development of software, and (3) production of certain computer systems.
Restricted industries are those in which the government maintains control. These industries include telecommunications and audio and visual products. Because the government is concerned about the way people think, no foreign investor may obtain more than a certain percentage share in companies in these industries.
Industries in the prohibited category include newspapers and books. Because the government wants to control the types of information people obtain, no foreign investor may invest in companies in these industries, and goods in these industries may not be exported or imported.
Industries in the permitted category are those that do not fall within the encouraged, restricted, or prohibited categories. Investment projects require the approval of government agencies.
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