China’s legal framework offers new opportunities for Spanish companies seeking to establish subsidiaries, acquire equity stakes or develop investment projects in the country. However, the applicable conditions vary depending on the sector, location and type of investment.

What are the key legal provisions that Spanish companies should be aware of in 2026?

1. Market Access: 29 Restrictions and the Opening of the Manufacturing Sector

China’s 2024 Negative List for Foreign Investment reduced the number of restrictive measures from 31 to 29 and eliminated foreign investment access restrictions in the manufacturing sector.

As a result, Spanish companies can establish wholly foreign-owned enterprises in manufacturing activities, provided they comply with other applicable legal requirements, without needing to involve a Chinese partner solely to satisfy foreign investment restrictions.

Pilot programmes also allow greater foreign participation in Internet Data Centres (IDCs), Content Delivery Networks (CDNs) and certain telecommunications services in designated areas of Beijing, Shanghai, Hainan and Shenzhen, subject to the necessary regulatory approvals.

2. Tax Incentives: What Benefits Are Available?

The 2025 Catalogue of Encouraged Industries for Foreign Investment entered into force on 1 February 2026.

Projects meeting the relevant eligibility requirements may benefit from incentives such as:

• Customs duty exemptions for certain imported equipment intended for use in eligible investment projects.
• A reduced 15% corporate income tax rate for qualifying enterprises in designated regions, compared with the standard rate of 25%.
• Preferential conditions for access to industrial land, subject to applicable regulations.

In addition, a tax incentive introduced in 2025 provides, subject to specific conditions, a tax credit generally calculated at 10% of eligible reinvested profits for qualifying foreign corporate investors.

3. Legal Protection for Foreign Investment

China’s Foreign Investment Law establishes specific legal safeguards:

• Expropriations in the public interest must follow statutory procedures and provide fair and timely compensation.
• Administrative authorities are prohibited from requiring forced technology transfers as a condition for granting regulatory approvals.
• Local governments must honour legally binding commitments and contracts entered into with foreign investors.
• Foreign-invested enterprises may use administrative complaint mechanisms without losing their right to pursue other available legal remedies.

4. What Legal Obligations Should Spanish Companies Review?

Before making an investment, three key areas require particular attention:

Licensing and Sector-Specific Restrictions. The absence of an activity from the Negative List for Foreign Investment does not eliminate the requirements established under the Negative List for Market Access or other sector-specific licensing obligations.

Reporting Obligations. Foreign-invested enterprises must submit initial investment information, relevant changes and annual reports through the designated official systems.

National Security and Competition. Certain investments involving sensitive sectors or the acquisition of control may be subject to national security review. Mergers and acquisitions meeting the applicable merger control thresholds may also require prior regulatory clearance.

Implications for Spanish Companies

Opportunities are particularly relevant for industrial, technological and specialised service projects. However, investment incentives and regulatory approvals must be assessed on a case-by-case basis.

The choice of business activity, province of establishment and investment structure can determine both effective market access and the tax treatment of a project.

In China, an investment that is legally permissible is not necessarily automatically authorised or eligible for tax incentives. Understanding these distinctions is essential before establishing a subsidiary or committing capital.