Under China’s Company Law and Administration of Registration of the Scope of Business of Enterprises Provisions, a company’s business scope shall be specified in its Articles of Association and be registered with the registry office in accordance with the law. Unlike other countries, a company registered in China can only engage in operation within its business scope. Hence, the investors shall carefully define the business scope of the company when they apply for the registration of their company.

1.	Special Administrative Measures (Negative List) for the Access of Foreign Investment
	Prior to the company’s formation, the foreign investor should confirm whether its proposed business scope consists in the Special Administrative Measures for the Access of Foreign Investment (hereinafter referred to as “Negative List”). In case that it is in the Negative List, the investor should further determine if the proposed activity is restricted or completely prohibited for foreign investment. If restricted, the investor should comply with the requirements provided in the Negative List. If prohibited, the investment is not allowed, and the investor cannot go further with the company’s registration.
	(1)	Restricted Areas for Foreign Investments The restricted areas for foreign investment shall be subject to prior approval from the competent government authorities and meet the shareholding restriction for foreign investment as prescribed in the Negative List. As China opens further to the outside world, there will be fewer fields in which foreign investment is restricted. For example, the restrictions on the proportion of foreign investment in such areas as commercial vehicles, passenger vehicles as well as in the financial services including securities, securities investment fund management companies and life insurance companies will be removed altogether within 2 years according to the Negative List 2019 version.
	(2)	Prohibited Areas for Foreign Industries As was mentioned above, foreign investors are not allowed to invest in any industry where foreign investment is prohibited in the Negative List. To give an example, overseas investors are totally prohibited to make the investment in scientific research and technology service that include investment in development and application of technologies in respect human stem cells, gene diagnosis and treatment, investment in institutes of humanities and social science and investment in geodetic surveying, marine charting, aerial photography for surveying etc. The investment in management of water conservancy environment and public facilities and culture, sports and entertainment are strictly prohibited by the government as well. Clearly, the industries which are prohibited to foreign investors, are normally the sectors concerning government security and social or public interests.
	In order to consider the changes of the new Negative List compared with its previous version and be ensure that you are entitled to invest in the industry of your choice, Kaizen hereby prepared the Comparative Chart for Special Administrative Measures (Negative List) on Foreign Investment Access in China between 2018 and 2019 versions as well as the list of highlights and notes for the new Negative list for your easy reference.  (Please refer to the link for details.)

2.

Amendment to the Business Scope

Under China’s Company Law and Administration of Registration of the Scope of Business of Enterprises Provisions, a company shall only engage in operations within its business scope as approved in its registration with the company registration authority. When a company intends to change the business scope, it should amend its Articles of Association and register such amendment accordingly within 30 days after the decision of business scope modification. The company shall apply for the change of business scope with the local registry office. Upon the completion of the change with the local registry office, the company shall handle the change with other government authorities such as the tax burau, foreign exchange control bureau and update the company information with its opening banks. For a trading company, it shall also apply for the change of customs registration, inspection and quarantine registration, e-port registration and so on.   Kaizen would like to remind you to handle the change within the prescribed time limit when you intend to apply for the change of business scope of your company. Otherwise there could be a risk of penalties from the registry office on the ground of operation without a license.