In new guidelines jointly issued by the National Development and Reform Commission and Ministry of Commerce, the government cut the restricted items by about a third, leaving 63 items still restricted, or off-limits to foreign investment.

The entries dropped from the list in manufacturing include rail transportation equipment, motorcycles, edible fats and oils, and fuel ethanol.

China, which requires foreign automakers to form joint ventures to manufacture domestically, also made an exception to a cap of two joint ventures per foreign automaker if a new JV company is going to make pure electric vehicles.

That follows state planner approval last month for Volkswagen AG (>> Volkswagen) to form a third JV with JAC Motors (>> Anhui Jianghuai Automobile Grup Corp Ltd) for making electric cars.

The measures come as President Xi Jinping seeks to project China as a world leader in fighting protectionism and defending globalisation.

The government has also said that as China opens its doors, it expects to get fairer treatment for Chinese firms investing abroad.

China will also lift restrictions on foreign investment in unconventional oil and gas development, including shale oil, oil sands and shale gas.

The new guidelines will take effect from July 28.

Premier Li Keqiang said this week Beijing would facilitate foreign investment by relaxing restrictions on the stakes overseas firms can hold in Chinese ventures and making it easier for them to register new companies locally.

China also encourages foreign investment in virtual reality, augmented reality technology and manufacturing of related equipment, as well as in 3D printing, in a push to promote its "Made in China 2025" plan.

The government also removed restrictions for overseas firms to build and operate large theme parks, fulfilling a promise to put more domestic and foreign companies on an equal footing.

Walt Disney (>> Walt Disney Company (The)) celebrates the first anniversary of its $5.5 billion theme park in Shanghai this month, a key plank of the entertainment giant's push into the world's second-largest economy through everything from English schools to films.

(Reporting by Beijing Monitoring Desk; Editing by Shri Navaratnam & Simon Cameron-Moore)