Draft law to usher in a new round of foreign investment boom in China

By Wei Jianguo Source:Global Times Published: 2019/3/12 21:38:40

Illustration: Xia Qing/GT

A draft foreign investment law that has been submitted to the second annual session of the 13th National People's Congress (NPC), China's top legislative body, for deliberations last week, is scheduled for a final vote on Friday. 

Since the end of last year, procedures for submitting the draft law to the NPC Standing Committee have accelerated over the past three months in a highly efficient manner.

Opinions and suggestions have been gathered on the new draft. The draft was posted on the NPC's website in an effort to solicit opinions. It has also received feedback from the National Development and Reform Commission, Ministry of Commerce, Ministry of Justice and other departments. Foreign companies have also had the chance to give their opinion on the new investment law. 

The new draft proposes a unified standard for foreign investment. In the past, local governments had separate foreign investment policies. Now, investment laws will move to the national level. 

The power to manage market access for foreign investment will now belong to the central government. Local governments will no longer be able to interpret or enforce investment laws as they see fit.

Should the new draft law pass, it will enhance protection on foreign investment. China needs a national law that protects their lawful rights to ease concerns and improve market confidence.

Intellectual property rights (IPR) and technology transfer have been major concerns of foreign businesses. During China's opening-up, advanced technologies were brought into the country along with foreign capital. But it was nothing like "forced technology transfer" accused by Western countries.

In the past, Chinese companies merely followed contracts without objection from Western countries. 

The only thing that is different is China's ascension as a global market leader which has caused Western countries great anxiety. 

China is sending a signal to the world, and just like other countries, it wants to catch up with the latest advanced technology. However, China does not force foreign companies to transfer technologies, nor has it ever engaged in such activities. 

China is willing to sign this into law in order to reinforce IPR protection in an effort to ward off prejudices and provide foreign companies with guarantees. 

The new draft is clear, unequivocal and complete with adequate illustrations on pre-establishment national treatment and a negative list. Foreign companies will be given the same treatment as domestic firms in the areas outside the negative list. 

Pre-established national treatment and a shortened negative list are leaps in the latest round of China's opening-up. The Government Work Report delivered during the two sessions has emphasized opening-up at the institutional and systematic levels. Protecting foreign investment with a new law is in line with this promise.

The new draft law will offer a unified rule of law for local governments to follow, therefore eliminating policy inconsistencies and promoting policy transparency. Previously, foreign investors would negotiate with local government officials. A few local governments made efforts to attract foreign investors by providing favorable policies on land, taxes, social security, and subsidies. But the policies varied and were too selective. In some cases, new governors would alter the favorable policies that were offered by their predecessors at will which created unnecessary disputes.

This year marks the 70th anniversary of the founding of the People's Republic of China. There has been some push back against globalization worldwide. China, at this crucial moment, has put forward a new foreign investment law to demonstrate the country's determination on further reform and opening-up. 

The new law will spearhead this latest round of opening-up at the institutional level, serving China's high development standards. The country will issue follow-up measures on IPR, government procurement and state-owned enterprises to create a transparent and convenient business environment under the rule of law to ease foreign investors' concerns. There will be a substantial increase in foreign investment once the new law takes effect.

The past four decades of China's opening-up have witnessed a flourishing period of foreign investment. The passage of this latest law will mark the beginning of a new period of foreign investment opportunities in China. 

The author is a former Chinese vice minister of commerce and executive deputy director of the China Center for International Economic Exchanges. bizopinion@globaltimes.com.cn


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