Below, we set out the four key policy pillars that emerged from the 2026 Two Sessions and what they mean in practice for foreign-invested enter-prises (FIEs) operating in or considering entry into the Chinese market.
Deepening Reforms and Ensuring National Treatment
Perhaps the most structurally significant commitment made at this year's sessions was the pledge to deepen the reform of mechanisms and systems for promoting foreign investment, with a specific guarantee that foreign-invested enter-prises will receive national treatment (the same treatment as their domestic counterparts) in terms of market access, resource acquisition, and government services. For practitioners and executives alike, this is a substantial commitment. Historically, FIEs have faced an uneven play-ing field in certain sectors, confronting informal barriers to government procurement, licensing, and access to subsidies or state-owned resources.
The formal commitment to national treatment, if consistently implemented and enforced, would fundamentally alter that dynamic. The emphasis on a fair and transparent competi-tive environment also reflects an awareness within Beijing that perceptions of regulatory ar-bitrariness remain a significant deterrent to in-bound foreign investment. Watch for implementing regulations to follow in the months ahead, which will be critical to un-derstanding how national treatment guarantees will be operationalized at the provincial and local levels.
Optimising Investment Guidance Through a New Industry Catalog
There’s more to the national treatment pledge. Officials announced the implementation of an updated Catalog of Industries Encouraging For-eign Investment, a notable instrument for direct-ing capital into sectors aligned with China's stra-tegic development priorities. The new catalog is expected to expand the categories of higher value-added, technology-intensive, and green economy industries open to foreign participation.
Policymakers also signalled a push to encourage existing FIEs to reinvest profits locally to expand domestic production. This will acknowledge the value of deepening the commitment of multinationals already established in China, rather than focusing exclusively on attracting new entrants. This "profit reinvestment" push could offer tangible fiscal or regulatory incentives for companies considering whether to remit earnings offshore or redeploy them domestically. For foreign companies navigating sector-specific restrictions, the new catalog will be essential reading. Legal advisers should review it closely to identify newly opened subsectors, any revised shareholding requirements, and whether preferred tax treatment or land-use rights attach to specific categories.
Opening the Service Sector: The Next Frontier
With restrictions on foreign investment in China's manufacturing sector having been comprehensively eliminated in recent years, the focus of liberalisation has now shifted decisively to services. This year's Two Sessions made that pivot explicit, with officials pledging to expand market access with a particular emphasis on the service sector. Of particular note are the pilot programmes announced in three high-profile areas: valueadded telecommunications services, biotechnology, and wholly foreign-owned hospitals.
Each of these sectors has historically been subject to significant ownership restrictions and regulatory complexity. The announcement of expanded pilots, likely through designated free trade zones or pilot cities, is a meaningful step towards broader liberalisation, even if national roll-out remains some way off. The logic behind this approach is instructive: by opening core service markets to international competition, Beijing aims not only to attract high-quality foreign capital but to use that competition as a driver of domestic service sector improvement. For international healthcare providers, tech companies, and life sciences firms, the pilot programmes merit close attention. Early engagement in these zones could yield firstmover advantages as the regulatory framework evolves. Facilitating Cross-Border Data Flow: A Compliance Game-Changer Perhaps no single policy area has generated as much operational anxiety for multinationals in China in recent years as data governance. The nexus of China's Personal Information Protection Law, the Data Security Law, and sectoral regulations has created genuine compliance complexity for companies with integrated global operations. Against that backdrop, the Two Sessions announcement on cross-border data flows stands out. Officials announced the introduction of "negative list" frameworks for cross-border data flows within pilot free trade zones, under which data exports would be permitted as a default for any item not specifically listed as restricted. This negative-list model, familiar from China's approach to foreign investment liberalisation more broadly, is a significant conceptual shift from the current presumption of restriction. The practical implications are most pronounced for multinationals in finance, advanced manufacturing, and the biopharmaceutical sector, where global R&D pipelines and cross-border management structures generate constant flows of sensitive data.
If the negative-list model is implemented effectively and nationally scaled, it could materially reduce the compliance burden that has caused some multinationals to segregate their China operations from global systems.
Looking Ahead: Signals vs. Implementation
China's leadership direction is clear. It recognises that the confidence of foreign enterprises is an economic asset, and that regulatory unpredictability has real costs. The emphasis on national treatment, sector opening, investment guidance reform, and data compliance reflects a sophisticated understanding of what multinational enterprises actually need to make long-term investment decisions.
That said, practitioners know that the distance between policy signals and ground-level implementation in China can be considerable. The months following the Two Sessions will be the true test: whether implementing regulations, local government guidance, and enforcement practice genuinely reflect the national treatment and opening commitments made at the centre. China Law Insider will be monitoring developments closely. We encourage clients with operations or investment interests in China to engage with their legal advisers now — the policy window that has opened at this year's Two Sessions may offer opportunities that reward early movers.