在(zai)現(xian)行有(yǒu)效的(de)《外商(shang)投(tou)資(zi)産(chan)業指導(dao)目(mu)錄》，"音像製(zhi)品(pin)咊(he)電(dian)子(zi)出版物(wù)的(de)編輯、出版、製(zhi)作(zuò)業務(wu)"列入"禁止外商(shang)投(tou)資(zi)産(chan)業目(mu)錄"中(zhong)，不允許外商(shang)投(tou)資(zi)；即使在(zai)多(duo)箇(ge)自貿區(qu)內(nei)，音像製(zhi)品(pin)的(de)製(zhi)作(zuò)仍屬于(yu)自貿區(qu)的(de)負面清(qing)單(dan)範圍，并禁止外商(shang)投(tou)資(zi)（基于(yu)內(nei)地與香港、澳們(men)的(de)安(an)排(pai)例外）。但近期在(zai)北京市(shi)試點地區(qu)，上述情況有(yǒu)了(le)新(xin)變化，外商(shang)可(kě)以(yi)在(zai)試點範圍投(tou)資(zi)音像製(zhi)品(pin)的(de)製(zhi)作(zuò)。

Audiovisual products, due to their sensitive nature, have long been closed to foreign investment in China.  Since mid-2017, however, foreign businesses have been allowed to invest in this area, although investment is currently limited only to Beijing and with various conditions in terms of operation.

According to the Provisions on the Administration of Audiovisual Products (音像製(zhi)品(pin)筦(guan)理(li)條例), audiovisual products refer to audio tapes, videotapes, recordings, compact discs and laser disks recorded with contents.  Further, the production of audiovisual products, as specified in the Regulations on the Administration of Production of Audiovisual Products (音像製(zhi)品(pin)製(zhi)作(zuò)筦(guan)理(li)規定), refers to the activity of processing audio, images and texts into audiovisual products through technical means such as recording and video recording.

Under the latest version of the Catalogue for the Guidance of Foreign Investment Industries (外商(shang)投(tou)資(zi)産(chan)業指導(dao)目(mu)錄) ("Catalogue"), the editing, publication and production of audiovisual products and electronic publications are still listed in the "Prohibited" category for foreign investment.  Even in some free trade zones where foreign investment commonly enjoys relatively favorable policies, the production of audiovisual products still falls within the scope of the negative list of the Catalogue which forbids the entry of foreign investment.

Following the Mainland and Hong Kong Closer Economic Partnership Arrangement (內(nei)地與香港關于(yu)建(jian)立緊密經(jing)貿關係(xi)的(de)安(an)排(pai)) ("CEPA") which was signed in 2003, the Supplementary Provisions on the Regulations Governing the Production of Audiovisual Products (關于(yu)<音像制品制作管理规定>的(de)補充規定), promulgated in 2010, permitted service providers from Hong Kong and Macao to invest in China to engage in the production of audiovisual products. However, to qualify as a service provider, the following conditions must be met:

1. the nature and scope of services it provides in Hong Kong should include the nature and scope of services to be provided in the Mainland;
2. it should be registered or established in Hong Kong and engage in substantive business operations for 3 years or more;
3. it pays tax on its profits according to the law during substantive business operations in Hong Kong;
4. it operates substantive business at the place it owns or rents in Hong Kong, and such a place should be in accordance with its business scope and scale; and
5. over 50% of its total workforce should be permanent residents/residents-without-restrictions of Hong Kong and residents in Hong Kong from the Mainland holding one-way permits.

In addition to these strict conditions, business operations are relatively costly in Hong Kong or Macao.  Consequently, foreign investors may not be willing or qualified to engage in the production of audiovisual products under CEPA.

This tightened policy orientation changed slightly after the State Council officially replied and approved the Plan for Deepening the Reform and Promoting the Comprehensive Pilot Program of Expanding Opening-up in the Service Industry of Beijing Municipality (國(guo)務(wu)院關于(yu)深化改革推進(jin)北京市(shi)服務(wu)業擴大(da)開放綜郃(he)試點工(gong)作(zuò)方(fang)案的(de)批(pi)複) on 11 June 2017.  It is noted in the reply that foreign investment is permitted in the production of audiovisual products, but only in Beijing National Music Industry Base, China Beijing Publishing Creative Industry Park, Beijing National Digital Publishing Base, and only in cooperation with a Chinese entity that has controlling rights of business operations and the right to final review of content.  It also mentioned that during the Pilot Program, relevant administrative regulations, state council documents, and some rules within the department regulations approved by the State Council shall be adjusted temporarily, to be followed by detailed rules promulgated separately.  To this end, the State Council reaffirmed the above policy by promulgating the Decision on Temporarily Adjusting the Special Administrative Measures for Administrative Approval and Access in Beijing Municipality (國(guo)務(wu)院關于(yu)在(zai)北京市(shi)暫時調整有(yǒu)關行政審批(pi)咊(he)準入特别筦(guan)理(li)措施的(de)決定) ("Decision") on 10 December 2017, providing a more definitive legal basis.

Nevertheless, there are no clear rules on the controlling rights of business operations and the right to final review of content.  However, our understanding is that the following may be required by the authorities:

1. the type of cooperation (e.g., a Chinese state-owned enterprise shall be involved, the Chinese co-operating entity shall hold a higher proportion of equity, or the Chinese co-operating entity has special voting rights);
2. its management rules (e.g., the Chinese co-operating entity shall be entitled to nominate the majority of the board/management members); and
3. decision procedures (e.g., the foreign entity may be prohibited from participating in the editing of the contents of the audiovisual products).

Due to the sensitivity of the production industry for audiovisual products, foreign investment into this industry is limited only to certain areas (Beijing National Music Industry Base, China Beijing Publishing Creative Industry Park, Beijing National Digital Publishing Base), and only the co-operating Chinese entity will have controlling rights of business operations and the right to final review of content.  However, despite these limitations, we believe that this trend presents massive business opportunities for foreign investors given the significant growth recently of China’s consumer economy.