New investment law declares China’s resolve to better business environment: expert

The rollout of a new foreign investment law declares China’s determination to optimize business environment, and underlines its efforts to further facilitate foreign investment with detailed institutional design, an expert told People’s Daily.

Deputies to the 13th National People's Congress (NPC) from east China's Jiangxi province, including secretary of the Communist Party of China (CPC) Ruijin Municipal Committee Xu Rui (1st from the right), general manager of China Railway Nanchang Group Ma Yejiang (middle) and mayor of Ganzhou city Zeng Wenming (1st from the left), are discussing on the draft of the foreign investment law. Deputies from Jiangxi province held a plenary meeting on March 10 to review the draft. (Photo by Shi Jiamin from People’s Daily)

The new law responds to long-standing questions concerned by foreign-funded companies and other investors by giving answers on how to define, promote, protect and manage foreign investment, added Zhang Sujun, vice president of the China Law Society.

His comments came after deputies from provinces, autonomous regions and municipalities deliberated on the latest draft of the proposed law in their plenary meetings on March 10. The new draft, which would serve as China’s basic law on foreign investment if adopted, has drawn attention from both home and abroad.

Upon adoption, the unified law will replace three existing laws on Chinese-foreign equity joint ventures, non-equity joint ventures and wholly foreign-owned enterprises.

The three laws have been working as the basic backup of China’s legal system for foreign investment after China embarked on the journey of reform and opening up, but now they could hardly catch up with the changing requirements in further deepening reforms and expanding opening up.

The draft further simplifies the management procedures on foreign investment and adds more service policies for foreign investors. It also requires policy-makers to collect the suggestions and opinions of foreign investors before formulating laws, rules or guidelines related to foreign investment.

The law also asks the authorities to perfect service system by providing foreign investors with consultations and other services on laws, rules, policies and project information.

“These provisions indicate that Chinese government is committed to creating a more favorable business environment by furthering its reforms in streamlining administration and delegating power, improving regulation, and upgrading services,” said Zhang.

The draft makes it clear that the state shall manage foreign investment according to the system of pre-establishment national treatment plus a negative list. In industries that are not on the negative list, domestic and foreign enterprises would be subject to a unified set of rules and compete on a level playing field.

According to the new law, foreign investors are accessed to business supporting policies rolled out by the country, excepting a few special cases stipulated by the laws and administrative rules.

It also upgrades a series of industrial and regional policies on investment services, capital inflow and foreign investment absorbing to law provisions, so as to reassure the legal guarantee for the equal treatment of domestic and foreign investors.

The overarching law also specifies measures to protect the rights and interests of foreign investors, especially their intellectual property rights (IPR).

The state shall protect the IPR of foreign investors based on law, and encourage technology cooperation based on voluntary agreement and commercial rules, the draft said, but stressed that the cooperation details must be decided by involved sides after voluntary consultation, and forced technology transfers through administrative means is not allowed.

Stressing the importance of honoring commitment, the draft also asks government departments at all levels to keep their policy promise for foreign investors and implement the lawful contracts they signed.

Zhang added that enabling a more unified and regulated management on the foreign investment, the new law will lay a solid foundation for China’s efforts to drive economic growth, deepen reforms and expand opening up by better utilizing foreign investment.