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Testing Out Negative List System For Oversea NGOs

2022.11.30 SUN, Jiangang (Roy)、YANG, Yating

According to the Report of the 20th National Congress of the Communist Party of China (“CPC Report”), high-quality development is a top priority in building a modern socialist country. China shall gradually expand the opening-up of rules, regulations and standards and make some cuts to the Negative List for foreign investment. The aim is to protect by law the rights and interests of foreign investors and create a market-oriented, law-based and internationalized first-tier business environment.

As for the regulation of overseas non-governmental organizations (“Overseas NGOs”), it is recommended to test out the Negative List system as early as possible to attract more overseas NGOs to China.

I. Current Regulatory Status

Presently, when Overseas NGOs come to China, they need to follow the Administrative Law on Activities of Overseas Non-government Organizations within the Territory of the People’s Republic of China (“Administrative Law”) and its supporting document the Guidance on Registration and Filing for Temporary Activities of Representative Offices of Overseas Non-government Organizations (“Guidance”). Overseas NGOs’ activities in China need to first be approved by an industrial supervisory authority and then be registered at a local public security bureau (“PSB”).

The Ministry of Public Security issued the Catalogue of Fields and Projects for Overseas NGOs Carrying out Activities in Mainland China in 2016 and amended it in 2019. Some provincial level PSBs issued catalogues, such as the Shanghai Municipal Public Security Bureau, who issued the Catalogue of Fields and Projects for Overseas NGOs Carrying out Activities in Shanghai, detailing the ministerial level catalogue (collectively, the “Catalogue”). Only projects or activities falling within the Catalogue could be approved by industrial supervisory authorities and then register at PSBs.

II. Dilemmas in Practice

Although the Administrative Law, the Guidance and the Catalogue have built a basic operational framework for Overseas NGOs, in practice, it is still difficult to set up representative offices of Overseas NGOs. This difficulty hinders some Overseas NGOs and will harm China’s high-quality reform and opening up.

This situation is caused by various reasons. Compared with PSBs which have set up a new department to enforce the Administrative Law (i.e., the Administrative Office of Overseas NGOs), many industrial supervisory authorities are unfamiliar with and lack motivation to handle the Administrative Law or Overseas NGOs. The functions of Overseas NGOs are complex, ranging from science and technology, trade and commerce to religion and politics, which are difficult to regulate. Industrial supervisory authorities are reluctant to accept and approve Overseas NGOs, either to reduce workloads or avoid risks, making it difficult for Overseas NGOs to establish representative offices or carry out activities in China.

III. Negative List System

The Negative List system is the main supervision in the field of foreign investment. It sets out in a centralized manner special administrative measures with respect to the access of foreign investment by illustrating the prohibited and restricted industries, fields and businesses in China. All kinds of market participants are allowed to have equal access to industries, fields and businesses which are not included in the Negative List.1

Administration in the field of foreign investment has undergone an opening-up journey from approvals on a project-by-project basis, to implementation of Industrial Guidance Catalogues, and then to the Negative List which is shorten continuously. These practices could provide a good reference for the administration of Overseas NGOs.

IV. Testing Out the Negative List System for Overseas NGOs

According to the PSB Overseas NGOs Service Platform, as of 22 November 2022, 678 Overseas NGOs have registered their representative offices since the implementation of the Administrative Law in 20172. Industrial authorities and PSBs should have gained solid supervisory experience in the field of Overseas NGOs. On the other hand, according to statistics from the Ministry of Commerce, from January 2021 to November 2022, 43,370 foreign-invested enterprises were newly established nationwide, with a 29.3% year-on-year increase3. Comparatively speaking, the potential of Overseas NGOs is still huge in China. Testing out the Negative List system for Overseas NGOs could be the right way to realize the ideal of “accelerating the construction of new development paradigms and striving to promote high-quality developments” that was set out in the CPC Report.

1. Refer to the Supervision of Domestic NGOs and Offer a National Approach

It was emphasized as early as 2013, in the Explanation of Institutional Reform and Functional Restructuring Plan of the State Council issued by the State Council, that organizations in certain types of industries (such as industry associations and commerce chambers, science and technology, public welfare and charity, urban and rural community services) could apply directly to civil affairs authorities for registration by law4. Approvals from supervisory authorities were no longer needed in these areas. Correspondingly, a “national treatment” for Overseas NGOs should be taken into consideration, and no industrial approval should be required. From the perspective of national safety, PSBs should have the capability to conduct national safety reviews on social organizations. In most cases, social organizations in fields such as industry associations and commerce chambers, science and technology, public welfare and charity, and urban and rural community services, are generally conducive to the stability of social development. Following a PSB review, these Oversea NGOs should be able to register directly. If necessary, industrial supervisory authorities may put some events or activities on a Negative List, but this list should be as short as possible.

2. Implement Negative Lists in Certain Territories and Form a Propagable and Replicable Experience for the Whole Country

As it takes time to amend the Administrative Law, the Guidance and the Catalogue under Chinese legislative principles, it is advisable to first adopt the Negative List system in certain territories (i.e., national free trade zones, business zones and development areas). Overseas NGOs on the Negative List are prohibited or subject to special approval requirements. For other Overseas NGOs, they could directly file their registration applications at a zone PSB, and such zone will soon become popular with high-quality Overseas NGOs.

[1] See Opinions of the State Council on Implementing Negative List System for Market Access, available at http://www.gov.cn/zhengce/content/2015-10/19/content_10247.htm, The State Council Website, last review on 22 November 2022.

[2] See Information Disclosure –Institutional Announcement, available at https://ngo.mps.gov.cn/ngo/portal/toInfogs.do, The Overseas NGOs Service Platform of the Ministry of Public Security, last review on 22 November 2022.

[3] See 43,370 new foreign-invested enterprises nationwide in the first 11 months of 2021, People’s Daily Online, available at http://finance.people.com.cn/n1/2022/0103/c1004-32322853.html, People’s Daily Online, last review on 22 November 2022.

[4] See Notice on allocation of tasks during the implementation of the “State Council institutional reform and functional transformation program, available at http://www.gov.cn/zwgk/2013-03/28/content_2364821.htm, The State Council Website, last review on 22 November 2022.

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