BEIJING TIANTAI LAW FIRM

On March 22 of this year, the Ministry of Commerce released for the first time the "Special Administrative Measures for Cross-Border Trade in Services (Negative List)" and the "Special Administrative Measures for Cross-Border Trade in Services in Free Trade Pilot Zones (Negative List)" (the national version and the free trade zone version of the negative list), which will be implemented starting from April 21, 2024.

This marks another significant institutional arrangement for opening-up in China's service sector following the negative list for foreign investment access. China has previously revised the negative list for foreign investment access five times, aiming to foster openness in non-cross-border trade in services (foreign investment). The publication of these two negative lists marks the first instance of China implementing nationwide negative list administration for cross-border trade in services.

I. Introduction to Trade in Services and the Negative List System

There are four modes of trade in services: cross-border delivery, consumption abroad, movement of natural persons, and commercial presence. Among them, the first three modes are collectively referred to as cross-border trade in services and are categorized as trade in services imports and exports; commercial presence belongs to non-cross-border trade in services (based on the establishment of foreign-owned institutions for operation). (1) The two major classifications of trade in services: cross-border & non-cross-border trade in services.

Main Category	Mode	Definition	Example	Whether Local	Statistical Basis
Cross-border trade in services	Cross-border delivery	Service providers deliver services from the territory of one member to the territory of another member, where consumers are located.	Providing services to foreign consumers located outside China through means such as telecommunications, postal services, computer networks, etc., within the territory of China.	The service providers are non-local	Trade in services
	Consumption abroad	Service providers, located within the territory of one member, provides services to consumers from another member.	For example, Chinese citizens receive medical services abroad during short-term stays in other countries.	The service providers are non-local
	Movement of natural persons	Service providers from one member enter the territory of another member as individuals to offer services.	For example, foreign service-oriented companies establish businesses in China to provide services to Chinese enterprises or individuals.	The service providers are local.
Non-cross-border trade in services	Commercial presence	Service providers from one member establish commercial entities in the territory of another member to offer services to consumers within the latter's territory.	For example, foreign service-oriented companies establish companies in China to provide services to Chinese enterprises or individuals.	The service providers are local.	It is classified as Foreign Affiliates Trade in Services (FATS). It is divided into Inward FATS (equivalent to service imports) and Outward FATS (equivalent to service exports).

(2) Two administrative models for market access: positive list & negative list. China's market access administration is divided into positive lists and negative lists. Positive lists specify "what can be done," while negative lists are more open and transparent administration model, where "anything not prohibited by law is allowed". The special administrative measures of negative lists are further divided into prohibited access and restricted access categories, with the former stating "market entities are not allowed to enter." Previously, China had two nationwide negative lists, the market access negative list and the foreign investment access negative list. The former applies to domestic and foreign investors, while the latter applies to foreign investors investing and operating in China (i.e., commercial presence).

II. History, Distribution, and Comparative Analysis of the National Negative List for Cross-Border Trade in Services

(I) Historical Context: The negative list for cross-border trade in services was previously implemented in pilot free trade zones, and this is the first time it is being expanded nationwide.

Year	Document/Meeting	Relevant Content
2024	2024 Government Work Report	Fully apply the negative list for cross-border trade in services
2023	2023 Government Work Report	Steadily expand institutional opening up by proactively adopting relevant rules, regulations, management, and standards.
2022	2022 Government Work Report	Explore new ways to develop trade in services and digital trade, and implement a negative list for cross-border trade in services.
2021	Ministry of Commerce's "Negative List for Cross-Border Trade in Services in Hainan"	The Negative List for Cross-Border Trade in Services in Hainan lists 70 special administrative measures in 11 categories targeting overseas service providers, effective from August 26, 2021.
2021	2021 Government Work Report	Open the service sector in a well-regulated way, launch more comprehensive trials on its opening, and formulate a negative list for cross-border trade in services.
2020	Closing Press Conference of the China International Fair for Trade in Services	Director-general of the Department of Trade in Services and Commercial Services of the Ministry of Commerce: "Will release the national version and the free trade zone version of the negative list for cross-border trade in services within the year, and intensify efforts on institutional opening up."
2020	2020 Government Work Report	The negative list for foreign investment will be significantly shortened, while a negative list will also be drawn up for cross-border trade in services.

(II) Distribution

The national version of the negative list for cross-border trade in services comprises a total of 71 items. This marks the first time that a nationwide negative list administration system for cross-border trade in services has been established, clarifying the "baseline" for the access of cross-border trade in services. The free trade zone version of the negative list for cross-border trade in services includes a total of 68 items. It makes opening arrangements in areas such as natural person professional qualifications, professional services, finance, and culture, steadily advancing the expansion of opening up in the field of cross-border services.

(III) Comparison of the National Version (2024 Edition), the Free Trade Zone Version (2024 Edition), and the Free Trade Port Version (2021 Edition) of the Service Trade Lists

Sector	National Version	Free Trade Zone Version	Free Trade Port Version,	Differences between National and Free Trade Zone Versions	Differences between National and Free Trade Port Versions
Agriculture, Forestry, Animal Husbandry, and Fisheries	1	1	1	-	-
Construction	1	1	1	-	-
Wholesale and Retail Trade	3	2	2	The Free Trade Zone Version does not include Item 5: "Overseas individuals are not allowed to apply for the auctioneer professional qualification examination."	The Free Trade Port Version does not include Item 5: "Overseas individuals are not allowed to apply for the auctioneer professional qualification examination."
Transportation, Warehousing, and Postal Service	13	13	13	-	The Free Trade Port Version does not include Item 10: "Ship inspection activities."
Information Transmission, Software, and Information Technology Services	6	6	6	-	In Internet Information Services, the Free Trade Port Version lacks one sub-item: "Internet religious information services."
Financial Services	15	15	17	In the Free Trade Zone Version, there are relaxations in Items 30, 34, and 36, where restrictions on overseas individuals engaging in securities investment consulting and futures trading consulting businesses are lifted. Additionally, overseas individuals employed within the free trade pilot zones are allowed to apply for the opening of securities or futures accounts.	The Free Trade Port Version does not include Item 39 (Credit Reporting Business): In securities consulting business, the Free Trade Port Version does not restrict overseas individuals from engaging in securities investment consulting business; In futures trading consulting, non-Chinese nationals residing in the Free Trade Port can engage in it, while others are not allowed.
Leasing and Business Services	12	11	12	The Free Trade Zone Version does not include Item 46: "Entities established outside China and overseas individuals are not allowed to engage in customs declaration business."	The Free Trade Port Version does not include Item 46: "Entities established outside China and overseas individuals are not allowed to engage in customs declaration business."
Scientific Research and Technical Services	5	5	4	The Free Trade Zone Version has relaxed Item 56, lifting restrictions on the qualifications examinations for real estate appraisers, registered urban planners, registered survey and design engineers, and registered supervision engineers.	The Free Trade Port Version does not include Item 56, which restricts qualifications examinations for real estate appraisers, registered urban planners, registered survey and design engineers, registered supervision engineers, asset appraisers, mineral rights appraisers, and registered surveyors.
Education	2	2	2	-	In personal education services, the Free Trade Port Version does not include the requirement of "2 years of professional work experience."
Healthcare and Social Services	2	1	1	The Free Trade Zone Version does not include Item 60: "Overseas individuals are not allowed to apply for the veterinary qualification examination, registration, or filing."	The Free Trade Port Version does not include Item 60, which prohibits individuals from applying for the qualification examination, registration, or filing of practicing veterinarians.
Culture, Sports, and Entertainment	11	11	11	The Free Trade Zone Version has relaxed Item 68, reducing the requirement for the proportion of Chinese participants in the main creative personnel of Sino-foreign cooperative television dramas from 1/3 to 25%.	The Free Trade Zone Version has relaxed Item 68, reducing the requirement for the proportion of Chinese personnel in the main creative personnel of Sino-foreign cooperative television dramas from 1/3 to 25%.

III. Relationship with Lists Related to Cross-Border Activities

Here are the four essential lists for cross-border activities: the Market Access Negative List (2022 Edition), the Negative List for Foreign Investment Access (2021 Edition) (national, FTZ, and Hainan versions), the Catalogue of Encouraged Industries for Foreign Investment (national, Hainan, and Central and Western regions versions), and the Negative List for Cross-Border Trade in Services (national, FTZ, and Hainan versions).

The relationships among these four lists are as follows:

1. The Market Access Negative List holds a dominant position. It applies nationwide throughout the People's Republic of China and maintains market order using a "single nationwide list" administration model. It outlines industries and businesses restricted or prohibited in China and applies to all domestic and foreign-funded enterprises in China.

2. Relationship between the Market Access Negative List and the Negative List for Foreign Investment Access

The Negative List for Foreign Investment Access specifically targets foreign investors and falls within the scope of foreign investment administration. The Market Access Negative List applies to both domestic and foreign investors and follows the principle of national treatment. In areas not covered by the Negative List for Foreign Investment Access, market access administration requirements are observed based on the principle of consistency between domestic and foreign investment.

3. Relationship between the Negative List for Foreign Investment Access and the Catalogue of Encouraged Industries for Foreign Investment

Both of these lists originated from the Catalogue for Guidance of Industries for Foreign Investment, the implementation of which began in 1995. This catalogue categorized foreign investment into four types: encouraged, permitted, restricted, and prohibited, serving as the main guidance document for foreign investment. In 2017, the Catalogue for Guidance of Industries for Foreign Investment formally introduced the Negative List for Foreign Investment Access. In areas outside the negative list, restrictive measures on foreign investment access should generally not be implemented. In 2018, the Negative List for Foreign Investment Access was separated from the previous Catalogue for Guidance of Industries for Foreign Investment and became the Special Administrative Measures for Foreign Investment Access (Negative List) (2018 Edition). In 2019, the National Development and Reform Commission and the Ministry of Commerce released the Catalogue of Encouraged Industries for Foreign Investment (2019 Edition). Since then, the positive and negative lists for foreign investment have been formally established.

4. Relationship between the Negative List for Foreign Investment Access and the Negative List for Cross-Border Trade in Services

The Negative List for Foreign Investment Access applies to foreign entities establishing entities within China. For example, setting up a foreign-invested enterprise in China to provide services to domestic market entities. Therefore, according to the broad definition of trade in services, this is referred to as "commercial presence." The broad definition of trade in services includes four modes: cross-border supply, consumption abroad, commercial presence, and movement of natural persons. Commercial presence was previously the main form of service provision by foreign investment. On the other hand, the Negative List for Cross-Border Trade in Services applies to situations where foreign entities directly provide services to domestic entities without establishing a presence within China. This includes cross-border supply, consumption abroad, and movement of natural persons.

IV. Background and Significance of the National Version and the Free Trade Zone Version of the Negative List for Cross-Border Trade in Services

The introduction of the national and free trade zone versions of the Negative List for Cross-Border Trade in Services is closely linked to China's strategic goals of further opening up its economy and aligning with international standards. Its significant implications are as follows:

1. Enhanced openness: By clearly specifying the areas in which foreign service providers can operate freely, unless explicitly restricted, these lists help achieve a higher level of openness. This aligns with international economic practices and aids in attracting foreign investment.

2. Enhanced confidence in the Chinese market: Clearer rules and greater transparency help boost confidence among foreign investors. Understanding specific restrictions aids in planning investments and operations in China.

3. Promoting innovation: Allowing increased foreign participation in various service sectors is expected to stimulate competition, innovation, and best practices. This is crucial for the modernization of China's service sector.

4. Differentiated policies in Free Trade Zones: Establishing separate lists for Free Trade Zones allows these areas to experiment with more liberal trade practices, serving as testing grounds for future broader national policies. This helps fine-tune policies before nationwide implementation.

These lists signify China's commitment to creating a more open economic environment, a crucial step towards facilitating foreign investment and global integration. By further relaxing restrictions in the service market, China aims to upgrade its domestic economic structure while making a positive contribution to the global economy.

Zhang He, Senior Partner and Director of the Management Committee at Beijing Tian Tai Law Firm, Deputy Secretary-General of the Medicine Committee of the Beijing Lawyers Association, Director of the Chaoyang District Lawyers Association in Beijing, Director of the Chaoyang District Lawyers Association's Law Firm Management and Compliance Construction Committee, and Deputy Director of the Medicine and Health Business Research Association of the Chaoyang District Lawyers Association in Beijing.

Lawyer Zhang He is particularly skilled in handling structurally complex projects and has relevant experience in civil and commercial dispute resolution, non-litigation services, and corporate compliance services. He adheres to the work philosophy of balancing legal compliance and business logic, and has been deeply involved in research, revision, and judicial practice related to standard drafting for many years. He has assisted various large and medium-sized enterprises, as well as start-ups, in conducting construction, and evaluation of internal control and compliance systems. He has long served as a legal advisor to government agencies, industry associations, and various enterprises. He has been involved in handling a number of projects or cases with significant impacts within respective industries such as the control disputes involving China Shanshui Cement, the control disputes involving Beijing SciClone Pharmaceuticals, the negotiations and agreement signings between Shenzhen Kangtai and the Hong Kong SAR government on a pre-procurement project, as well as a commercial project involving Beijing Minhai and the Malaysian government. He has been invited by multiple levels of government departments, industry associations, and enterprises to interpret laws and regulations, provide training, and assist regulatory authorities and enterprises in conducting construction and evaluation of internal control and compliance systems.