China Opens Key Service Sectors to Foreign Investment

China’s Ministry of Commerce (MOFCOM), jointly with the National Development and Reform Commission (NDRC) and the Ministry of Finance, released the “Action Plan for Stabilizing and Optimizing Foreign Investment” on June 22, 2026, unveiling 15 measures across five key areas designed to attract foreign capital into the services sector. The plan targets education, finance, and pharmaceuticals for expanded foreign participation, marking a significant push for economic liberalization as China enters its 15th Five-Year Plan period (2026–2030), as reported by Xinhua News.

Context: A Strategic Pivot to Services

China has progressively opened its economy to foreign investment since joining the WTO in 2001, with the foreign investment negative list steadily shortened over the years. The manufacturing sector’s foreign investment restrictions have now been fully eliminated, reducing the national negative list to just 29 items. Jing Qin, an official from the NDRC’s Foreign Capital Department, stated that the country will “promote the orderly expansion of opening in telecommunications, internet, education, culture, and medical fields.”

The policy shift comes amid headwinds in global investment flows. Between January and May 2026, China recorded 25,297 new foreign-invested enterprises, a 5.3% year-on-year increase, but actual utilized foreign capital fell 8.6% to 327.29 billion yuan. However, May alone saw a 5.9% rebound, and high-tech industry FDI surged 19.4% to 130.14 billion yuan, accounting for 39.8% of total foreign investment, according to data released by MOFCOM.

Key Sector Openings

Education

Under the new plan, China will expand pilot programs for foreign vocational training institutions and vocational colleges, and open pilot programs for high-level STEM and medical universities. This represents a significant shift in China’s traditionally cautious approach to foreign involvement in education, potentially allowing international institutions greater access to China’s vast education market.

Finance

The financial sector sees multiple liberalization measures. The plan supports more foreign institutions in using risk management tools including treasury bond futures, allows foreign institutions to conduct fund investment advisory business, and optimizes cross-border business management. Key foreign enterprises will receive cross-border financing facilitation quotas, and the plan improves pre-listing communication services for foreign enterprises seeking domestic IPOs, potentially deepening China’s capital markets.

Pharmaceuticals and Medical Services

In a major breakthrough for the pharmaceutical sector, the plan outlines rules for segmented pharmaceutical production, enabling cross-border production of biologics and chemical drugs. It also proposes expanding pilot zones for biotech and wholly foreign-owned hospitals beyond the current nine locations (Beijing, Shanghai, Tianjin, Nanjing, Suzhou, Fuzhou, Guangdong, Shenzhen, and Hainan). The plan supports insurance companies in including more innovative drugs and devices in commercial coverage and facilitates foreign-produced drugs entering retail pharmacy channels.

Official Statements and Data

Vice Minister of Commerce Ling Ji, speaking at a State Council Information Office press conference in Beijing, described the current state of foreign investment in China as characterized by “stable scale, stable operations, stable contributions, and stable expectations,” as Xinhua reported. He noted that by the end of 2025, China hosted 533,000 foreign-invested enterprises with a stock of foreign capital approaching $4 trillion. In 2025 alone, over 8,000 foreign enterprises increased their investment in China, a 10% year-on-year increase, and nearly 4,000 have added investment in the first five months of 2026.

Zheng Yong, an official from the Ministry of Finance’s Treasury Department, emphasized that “equal treatment of all types of business operators, including foreign-invested enterprises, is a basic principle that China’s government procurement has always adhered to,” addressing a key concern for foreign firms operating in China.

Analysis: Institutional Opening Takes Center Stage

The new measures represent a shift from “policy-based opening” to “institutional opening” — aligning rules and standards with international norms. The plan also includes significant incentives for foreign enterprises to establish R&D centers in China, with improved support policies, tax incentives for imported scientific research supplies, and facilitation of high-level foreign talent introduction.

Ling Ji highlighted that consumption boost has become “a new track for foreign investment development in China,” noting that foreign auto brands accounted for over 35% of trade-in new vehicle sales and foreign brands for over 13% of home appliance and digital product trade-ins. The plan explicitly supports foreign enterprises in participating in green consumption initiatives and international consumption center city development.

Since 2023, MOFCOM has established a foreign enterprise roundtable system, holding 50 sessions by June 2026, which has served as a channel to address specific difficulties faced by foreign firms. A key projects task force has resolved nearly 3,000 issues for foreign enterprises.

What to Watch For

The success of these policies will depend on how quickly implementing regulations are issued at the local level and whether national security reviews create de facto barriers despite formal opening. Key questions remain about the timeline for expanding biotech and hospital pilot zones, and whether these measures can reverse the 8.6% decline in FDI seen in early 2026. The policies come amid ongoing US-China trade tensions and Western calls for de-risking, positioning China’s market access offer as a strategic counterweight in the global competition for investment capital.

As Ling Ji stated, the next steps will focus on promoting services sector market access and opening, with China committed to “continuously expanding opening up” while balancing development and security concerns, aiming to further consolidate its position as a top global destination for foreign investment.