Market access updates for foreign investments in China's renewable sectors

In the energy sector, since renewable energy is not listed in the 2019 Negative List, foreign investments on a basis of 100% foreign ownership are allowed in this sector.  In fact, foreign investments in certain renewable areas are covered in the Encouraged Catalogue, which may offer additional tax and other incentives. Such encouraged sectors include:

• construction and operation of renewable energy projects (including solar energy, wind energy, geothermal energy, tidal energy, tidal current energy, wave energy, and biomass energy);
• manufacture of key equipment for renewable energy generating (including equipment for 2.5MW or above wind farms); and
• In certain central and western areas of China, R&D, production and application of large energy-storage technology (involving air energy storage technology or wind power supply) are also encouraged.

For these encouraged sectors, certain tax and other incentives may apply, which include:

• imported self-use equipment that is within its total investment may be exempted from customs duty(except for import linked value-added tax);
• in central and western areas of China, investors may enjoy 15% enterprise income tax rate holiday; and
• applicable land preferential policy.

In terms of wind energy, China has so far focused on driving the development of onshore wind as a key contributor to its renewables targets. However, it is somehow challenging to connect the wind power generated in the western regions of China to its eastern coastal areas, which are hungry for energy.  In addition, the Chinese government has a desire to diversify energy sources.  These factors have led to an increasing focus on offshore wind as potential new source of renewable energy close to the demand. Indeed, the government has set ambitious targets of 5GW of installed offshore wind capacity by 2020. It was reported that on 25 March 2019 the China Energy Investment Corporation, a leading industrial player in China's electricity market, signed a cooperation agreement with a French investor to jointly develop two offshore wind power projects in China, which account for a total installed capacity of 500MW.  Follow up on this pioneering project, more foreign-invested offshore wind farms are expected in the future in light of the favorable policies offered by the Chinese government.