Updated foreign investment law guarantees national treatment for foreign companies

By Shen Weiduo Source:Global Times Published: 2019/1/30 22:03:40

Unified law showcases nation’s determination to further open: analysts



China's Ministry of Commerce (MOC) spokesperson Gao Feng answers questions during a press conference in Beijing, capital of China, January 10, 2019. Photo:Xinhua



An updated draft foreign investment law highlighting pre-establishment national treatment and intellectual property rights (IPR) protection for foreign firms will be submitted for formal approval on March 5, the latest move to showcase China's resolution for further opening-up.

The new draft law was deliberated during a two-day session by a meeting of members of the National People's Congress (NPC) Standing Committee that started on Tuesday.

"There is an urgent need for such a unified law to provide stronger legal protection for further opening-up and better using foreign investment," Justice Minister Fu Zhenghua said at the session. 

Fu noted that the laws could hardly keep pace with the changing requirements of building a new system for an open economy. 

Once adopted, the unified law will replace three existing laws on Chinese-foreign equity joint ventures, non-equity joint ventures and wholly foreign-owned enterprises, according to a report by the Xinhua News Agency on Wednesday. The first draft of the law was submitted December 23, with the draft made available for public comment until February 24.

Apart from protections in line with the first draft on foreign-invested companies' IPR and a ban on forced technology transfers, the new draft further expanded an article on the system of "pre-establishment national treatment" and the "negative list."

The updated draft also said that the state shall not expropriate or requisition foreign investment, except under particular circumstances and in the public interest. The draft includes specific regulations regarding antitrust examination of mergers and acquisitions by foreign enterprises and penalties for failing to report their investment information to related authorities, Xinhua said. 

"The reforms advanced in the draft law are positive and, hopefully, an important indication of China's continuing desire to open up further," the American Chamber of Commerce (AmCham) in China said in a statement sent to the Global Times on Wednesday.

"We appreciate the Chinese government's efforts to unify the legal framework for foreign investment administration, as well as its commitment to promote a predictable, transparent, and fair legal and regulatory regime for foreign investment in China,"  AmCham said.

Rights and responsibilities

China has been widening market access for foreign investors, Dong Dengxin, director of the Financial Securities Institute at Wuhan University of Science and Technology, told the Global Times on Wednesday. 

"The updated draft, which further removes barriers and clarifies regulations for foreign investment, shows the country's ambition to guarantee a favorable business investment for them," Dong said. He noted that the updated draft law for the first time highlights equal treatment for foreign and domestic firms, showing China's confidence in its economy.

In June 2018, the National Development and Reform Commission, China's top economic planner, unveiled a new version of the negative list that sets out sectors where foreign investment is limited or prohibited. The number of items on the negative list was cut to 48 from 63 in the previous version, which was released in June 2017.

Bai Ming, deputy director of the Ministry of Commerce's International Market Research Institute, said that the updated draft also listed specific regulations for foreign investors in China, telling them "if they want to operate in China, and enjoy the preferential policies we provide, they have to respect China's laws accordingly."

For example, if under some extreme circumstances, such as natural disasters when the government has to expropriate or requisition foreign investment, they also have to provide corresponding cooperation, Bai said.

Zhang Shizhan, general manager of an Israeli tech company based in Shenzhen, Guangdong Province, said the new draft would of course be a boost for them to expand in China. He mentioned concerns over implementation of the law in the future. 

"Our concerns are mainly about the IPR part. We really hope the new law could fully ensure foreign tech companies' interests in that sector," Zhang said.


Newspaper headline: NPC updates draft foreign investment legislation


Posted in: ECONOMY

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