On December 24, 2025, China's National Development and Reform Commission (NDRC) and Ministry of Commerce unveiled the 2025 version of the Catalogue of Encouraged Industries for Foreign Investment. This updated catalogue, effective from February 1, 2026, represents a significant policy shift designed to attract high-quality foreign investment into strategic sectors of China's economy.
What Is the Catalogue of Encouraged Industries?
The Catalogue of Encouraged Industries for Foreign Investment is a critical policy document that guides foreign investment toward sectors aligned with China's economic development priorities. Foreign-invested enterprises (FIEs) operating in encouraged industries enjoy preferential policies that can significantly reduce operational costs and regulatory burdens.
Key Benefits for Encouraged Industries
| Benefit | Description | Estimated Value |
|---|---|---|
| Reduced CIT Rate | Corporate Income Tax reduced from 25% to 15% | 40% tax savings |
| Import Duty Exemption | Exemption on imported self-use equipment | Up to 17% savings |
| Land Use Priority | Priority access to industrial land | Faster setup |
| Simplified Customs | Streamlined import/export procedures | Reduced admin burden |
| Regional Incentives | Additional benefits in FTZs and development zones | Varies by location |
Major Changes in the 2025 Version
The 2025 catalogue reflects China's evolving economic priorities, with significant additions in sectors supporting technological self-reliance, carbon neutrality goals, and high-quality development.
New and Expanded Sectors
1. Advanced Manufacturing
- High-end CNC machine tools and intelligent manufacturing equipment
- New energy vehicle components, including battery management systems and electric drive systems
- Aerospace equipment manufacturing and maintenance
- Advanced medical equipment, including high-end imaging devices and surgical robots
- Precision instruments and high-end measuring equipment
2. Modern Services
- Research and development (R&D) centers β now explicitly encouraged across all high-tech sectors
- Regional headquarters β multinational corporations establishing Asia-Pacific or China headquarters
- Shared service centers β finance, HR, IT, and procurement shared services
- Intelligent logistics β smart warehousing, supply chain management, and cold chain logistics
- Professional services β technical testing, product certification, and engineering consulting
3. High-Tech and Digital Economy
- Artificial Intelligence (AI) β AI chip design, algorithm development, and intelligent application scenarios
- Big data and cloud computing β data centers, cloud services, and data analytics
- Integrated circuits β chip design, manufacturing, packaging, and testing
- 5G and next-generation communications β equipment manufacturing and application development
- Industrial internet β platforms and solutions for smart factories
4. Green and Low-Carbon Industries
- Renewable energy β solar, wind, and hydrogen energy equipment manufacturing
- Energy storage systems β battery energy storage and pumped hydro storage
- Carbon capture and utilization β CCUS technologies and services
- Environmental protection equipment β pollution control and waste treatment
- Resource recycling β circular economy and waste-to-resource technologies
5. Agriculture and Food Security
- Modern seed industry β breeding and production of high-quality crop seeds
- Smart agriculture β precision farming and agricultural IoT
- Agricultural product processing β deep processing and value-added products
- Food safety testing β advanced food safety and quality testing services
Regional Distribution Strategy
The 2025 catalogue continues to encourage foreign investment in central, western, and northeastern regions, offering additional incentives for projects located in these areas. Key regional focuses include:
| Region | Encouraged Focus Areas | Additional Benefits |
|---|---|---|
| Western China | Clean energy, agriculture, tourism | Extended tax holidays, lower land costs |
| Central China | Advanced manufacturing, logistics | Transfer payment incentives |
| Northeast China | Equipment manufacturing, agriculture | Revitalization fund support |
| Hainan FTP | Tourism, modern services, high-tech | Zero tariff, 15% CIT, simplified forex |
How to Qualify for Encouraged Industry Benefits
Step 1: Verify Your Industry Classification
Check whether your business activities fall within the encouraged catalogue. The classification is based on the National Economic Industry Classification (ε½ζ°η»ζ΅θ‘δΈεη±») codes. You may need to consult with local commerce authorities or professional advisors to confirm your exact classification.
Step 2: Meet the Technical Requirements
Many encouraged sectors have specific technical or operational requirements. For example:
- Manufacturing projects may need to demonstrate advanced technology or processes
- R&D centers typically require minimum investment in R&D personnel and expenditure
- Regional headquarters must meet certain operational scope and management requirements
Step 3: Complete Filing Procedures
Submit your project information to the local commerce department through the Foreign Investment Information Reporting System. For encouraged industries, this is typically a filing procedure rather than an approval process, significantly reducing setup time.
Step 4: Apply for Tax Incentives
After establishment, apply for the preferential CIT rate with the local tax authority. Required documents typically include:
- Business license and approval/filing certificates
- Project feasibility study demonstrating encouraged industry activities
- Technical documentation supporting advanced technology claims
- Commitment letter for meeting ongoing operational requirements
Comparison: Encouraged vs. Permitted vs. Restricted
| Category | Treatment | Key Characteristics |
|---|---|---|
| Encouraged | Preferential policies, tax incentives | Listed in Encouraged Catalogue; 15% CIT possible |
| Permitted | National treatment | Not on any list; standard 25% CIT; no restrictions |
| Restricted | Conditional access | On Negative List; JV requirements, Chinese control |
| Prohibited | Not allowed | On Negative List; foreign investment forbidden |
Strategic Implications for Foreign Investors
Opportunities
- Technology transfer alignment: The catalogue rewards companies bringing advanced technology to China
- Green transition: Significant opportunities in carbon-neutral technologies and renewable energy
- Service sector opening: Expanded access to previously restricted service sectors
- Regional diversification: Incentives to explore opportunities beyond coastal regions
Considerations
- Technology sovereignty: Increasing emphasis on local R&D and IP development
- Compliance requirements: Encouraged status comes with ongoing reporting obligations
- Policy evolution: Catalogue is periodically updated; long-term planning should account for potential changes
Frequently Asked Questions
See the FAQ section below for answers to common questions about the 2025 Catalogue of Encouraged Industries.
Conclusion
The 2025 Catalogue of Encouraged Industries represents China's continued commitment to attracting high-quality foreign investment aligned with its strategic development goals. For foreign investors, understanding and leveraging these incentives can provide significant competitive advantages in the Chinese market.
Companies considering China entry or expansion should carefully review the catalogue, assess how their operations align with encouraged sectors, and develop strategies to maximize available benefits while ensuring compliance with evolving regulatory requirements.