The Promising Aspects of China’s New Foreign Investment Law

On March 15, 2019, China passed its new Foreign Investment Law at the dual ‘Two Sessions’ meeting of the Chinese People’s Political Consultative Conference (CPPCC) and the National People’s Congress (NPC), China’s chief legislative body. The new law will come into force on January 1, 2020, replacing the Chinese-Foreign Equity Joint Ventures Law, the Foreign Capital Enterprises Law, and the Chinese-Foreign Contractual Joint Ventures Law.

An Overview of China’s New Foreign Investment Law

In the opinion of the market experts, the new foreign investment law promises equal government support to both foreign and domestic enterprises. The Chinese government will start to give equal importance when applying for license and the overseas companies will be able to take part in setting industry standards and in government procurement. However, the Chinese authorities can conduct a National Security Reviews where decisions are final and appeals will be accepted. Recent amendments have included adding a right to appeal non-security related decisions together with a complaints mechanism. The law’s prime objectives are to improve the openness, transparency and predictability of the investment environment for foreign investors.

Primary Features-

By general consensus, the most important features of the Foreign Investment Law include:
  1. Protection of the intellectual property rights of foreign investors
  2. Give foreign businesses a broader market access
  3. Prohibition of forced technology transfers
  4. National treatment of foreign-invested enterprises
  5. Equal treatment in government procurement
  6. A last-minute change imposing criminal penalties for sharing sensitive foreign company information

How the Investment Law Will Help Colling Down China-US Trade Tensions

Amidst the China-US trade war negotiations, the new investment law may work as a confidence-building process. The Chinese government believes that the new foreign investment law will become the most valuable legal measure for China’s continuous process of opening up to the outside world, following China’s entry into the World Trade Organizations in the year 2001. It is a well-conceptualized decision by the Chinese authorities to boost the investment and involvement of more foreign companies in the Chinese soil that will help the country to become a high-grade manufacturing power.

Final Thoughts

From a business perspective, the Foreign Investment Law embodies China’s resolve to continue to refine its laws to accommodate the ever-changing global economy. It is expected that the overseas companies doing business with China and in China will welcome the rules laid down in the new Foreign Investment Law for the promotion and protection of their investment in China.

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