Three Highlights in China’s new investment law
Source: People’s
Daily
The “negative list”
system, equal treatment of domestic and foreign investment as well as
intensified protection of legitimate rights and interests of foreign investors
have made up three biggest highlights of China’s newly-drafted foreign
investment law, experts pointed out, in the belief that the
rollout of the new law will help China optimize its business investment.
The draft, which was
submitted to the ongoing session of the 13th National People's Congress (NPC)
for deliberation on March 8, is expected to be put up for a vote by nearly
3,000 national legislators on March 15.
Before the
submission, the draft law has gone through two readings by the NPC Standing
Committee in last December and this January respectively.
After China embarked
on the journey of reform and opening up, China has been providing institutional
guarantee for its expansion of opening up and utilization of foreign investment
with a legal system based on the three existing laws.
But now the three
laws could hardly catch up with the changing requirements in
pushing ahead with reform and opening up in the new era and in building a new
system of open economy, which means that a unified and overarching law on
foreign investment has to be enacted based on previous experience.
Data indicated that
as of last November, there were 950,000 foreign-funded companies registered in
China that have brought more than $2 trillion into the country. The figure indicates that foreign investment has grown into a
key driver of China’s economic and social progress.
Foreign investments,
especially those technology-intensive ones, will play a long-term and key
propelling role for economic growth of China, the biggest developing country in
the world, said Zhang Yuyan, director of the Institute of World Economics
and Politics under the Chinese Academy of Social Sciences.
Against such
backdrop, the country needs to provide foreign investors with a sound legal
ecosystem, he said, adding that it is also a key part of China’s efforts to
foster international economic cooperation and push ahead all-round opening up.
Putting how to
promote and protect foreign investment on its top agenda, the law is helpful in
stabilizing the expectation and confidence of foreign investors, said Lam Lung
On, chairman of Yuzhou Properties.
The law requires the
authorities to implement policies of high-level investment facilitation and
liberalization, build a legal system that protects the legitimate rights and
interests of foreign investors, establish a mechanism to restrain the role of
governmental departments and resolve complaints from foreign companies, added
Lam, also chairman of Hong Kong Chinese Importers'& Exporters' Association.
Experts also listed three
biggest highlights of the law, namely the “negative list” system, a unified
management standard of domestic and foreign investment, as well as intensified
protection of legitimate rights and interests of foreign investors.
No. 1:
“Negative list” system
The draft law stipulates
that China will manage foreign investment according to the system of
pre-establishment national treatment plus a negative list.
This means that
foreign investors and their investments shall enjoy treatment no less favorable
than that afforded to Chinese investors and their investments at the stage of
investment access.
The “negative list”
management system means that the country will specify the special management
measures for entry of foreign investment in certain fields, and grant foreign
investors to a national treatment in sectors that are not on the list.
Based on the new law,
the approval and registration procedures for setting up or business alteration
of foreign-invested enterprises will be abolished and replaced by the system of
pre-establishment national treatment plus a negative list, said Wang Chengjie,
vice chairman and the Secretary-General of China International Economic and
Trade Arbitration Commission.
The draft, which
adopts a unified set of rules with the provisions to manage domestic firms, encourages
an all-round implementation of the national treatment to provide domestic and
foreign companies with a level playing field, he elaborated, adding that the
law also enables China to further keep in step with international norms and
press ahead with investment liberalization and facilitation.
It constituted the
core value and biggest highlight of the legislation of foreign investment law,
Wang concluded.
Upon the adoption of
the law, relevant departments and local governments can no longer formulate
procedures of market entry in a rash way, and foreign investment can access to
all areas not on the prohibited or restricted list, said Xiao Jiangping, the
director of Competition Law Research Center of Peking
University.
Foreign investment will
be treated equally in rules, rights and opportunities with domestic capitals,
he added.
No.2: Domestic, foreign investment to be
managed under a unified set of law
China, in its report to
the 19th National Congress of the Communist Party of China (CPC),
pledged that all businesses registered in China will be
treated equally.
Areas where foreign investment is
prohibited or restricted will be detailed in the negative list, while industries that
are not on the list will be fully open, with domestic and foreign firms enjoying the same
treatment, Xiao expounded on the draft provisions.
Describing it as a fundamental change to China’s management system of
foreign investment, the professor said the law will make domestic investment
environment more open, transparent and predictable.
The draft also covers a string of specific measures to provide foreign
and domestic firms a fair environment for market competition.
The new law, for instance, requires equal applicability of China’s mandatory
standards to foreign investors, as well as equal access of the products they
produce on Chinese territory to government procurement.
“These provisions respond to the long-standing appeals of the foreign
investors, ensure the applicability of mandatory standards to all domestic and
foreign businesses, and also grant their equal rights to engage in government procurement,” said Sang Baichuan,
director of the Institute for International Business at the University of
International Business and Economics in Beijing.
No.3: Protection of legitimate rights and interests of
foreign investors
The law also includes an article to detail how to protect
foreign investment, in which it makes clear that the state shall protect the
intellectual property rights (IPR) of foreign investors, as well as the
legitimate rights and interests of right holders.
Technology cooperation based on voluntary agreement and
commercial rules is encouraged, the draft said.
The new law incorporates more measures to protect the
foreign investment than the previous management regulations, said Feng Fan,
director of Jiangxi Newstar Law Firm, elaborating that it offers more guarantee
and convenience in protection of business environment, capital market, IPR and
technologies.
It will not only boost foreign investors’ confidence in
Chinese market, but also facilitate a healthy and orderly development of
China’s market economy, he added.
Zhu Jiandi, a deputy to the 13th National People's Congress (NPC) from
Shanghai is giving a thumb to the remarks of another deputy Xu Zheng at a panel
meeting of the Shanghai legislators held on March 10, 2019. (Photo by Weng Qixu
from People’s Daily Online)
Three Highlights in China’s new investment law
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