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3. What items are encouraged for foreign investment by China, and what are prohibited?
To direct foreign investment to go along with the development scenario of Chinese industries, and to avoid blind investment, the Chinese government promulgated in June 1995 the Interim Provisions for Guiding Foreign Investment and the Industrial Catalogue for Foreign Investment. The industrial projects in the catalogue are divided into four categories ― the encouraged, permitted, restricted, and prohibited. In late 1997, the Chinese government revised the above-mentioned catalogue in line with the development of the national economy. The revised catalogue reflects expansion in the investment scope encouraged by the state and highlights priority industries. It embodies the principles of compliance with structural readjustment, of being conducive to the introduction of advanced technology, and encouragement of foreign investment in China's central and western areas.

The items in the catalogue encouraged for foreign investment mainly include: new agriculture technologies, comprehensive development of agriculture, energy resources, communications, important raw materials, new and high technologies, export-oriented and foreign-currency-earning projects, comprehensive utilization and regeneration of resources, prevention of environmental pollution, and those that give play to the advantages of China's mid-west areas. Meanwhile, foreign investment is directed to the technological upgrading of traditional industries and old industrial bases and to the continued development of labor-intensive projects that comply with the state's industrial policies.

Foreign investment is prohibited in projects that endanger the state security and bring damages to public interest; that cause pollution of the environment and damage natural resources and public health; that use large farmland and are unfavorable to the protection and development of land resources; and that endanger the security and normal function of military facilities.

The state will continue to make appropriate revisions to the Industrial Catalogue for Foreign Investment and to the Interim Provisions for Guiding Foreign Investment in accordance with the development need of the national economy and China's commitment on the entry of the WTO.

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