2020 NEW CHANGES OF FOREIGN INVESTMENT LAWS IN CHINA

There will be new changes in foreign investment laws in China. The foreign investment law will come into effect on January 1 next year.

The second session of the 13th National People’s Congress voted to adopt the foreign investment law of the People’s Republic of China, which will replace the “three laws on foreign investment” and take effect from January 1, 2020.

The second session of the 13th National People’s Congress passed a foreign investment law to better protect and attract foreign investment by legal means, premier li keqiang said. The scope of non-forbidden access for foreign investment will be expanded, and punitive compensation mechanism will be introduced for infringement.

The implementation of the pre-establishment national treatment plus a negative list management system for foreign investment in this law has established a level playing field for foreign investment in China.

– The provisions of this law on the administration of pre-establishment national treatment plus negative list for foreign investment, the establishment of a level playing field for foreign investment in China, and the protection of intellectual property rights have become the three highlights of the market.

The latest data released by the ministry of commerce shows that in the first two months of this year, China’s actual foreign investment continued to grow steadily, with the us investment in China increasing by 44.3 percent.

Compared with the third draft of the official document made seven amendments and improvements.

According to the website of the NPC, seven changes have been made to the foreign investment law, including clarifying the scope of government procurement, strengthening the accountability for intellectual property infringement, making it clear that administrative organs and their staff are not allowed to divulge commercial secrets, and making it clear that the specific implementation measures will be stipulated by the state council.

– The main amendments are as follows

• 1. Article 16 is amended to read: “the state shall ensure that foreign-invested enterprises participate in government procurement activities through fair competition in accordance with the law. The government shall, in accordance with the law, give equal treatment to products and services produced and provided by foreign-invested enterprises within the territory of China in government procurement. This means that government procurement includes both goods and services.
• 2. The first paragraph of article 19 is amended to read: “people’s governments at all levels and their relevant departments shall, in accordance with the principles of convenience, efficiency and transparency, simplify their procedures, improve efficiency, optimize government services and further improve the service level for foreign investment.” The detailed terms reflect the requirements of “CPF”.
• 3. The first paragraph of article 22 is amended to read, “the state protects the intellectual property rights of foreign investors and foreign-invested enterprises, and protects the lawful rights and interests of the owners of intellectual property rights and the relevant owners of intellectual property rights; As for the infringement of intellectual property rights, legal responsibilities shall be strictly investigated in accordance with the law. This requirement further improves the provisions on intellectual property protection and strengthens the accountability.
• 4. Article 1 is added as article 23, stipulating that “administrative organs and their staff shall, in accordance with the law, keep secret the commercial secrets of foreign investors and foreign-invested enterprises they have come to know in the course of performing their duties and duties, and shall not disclose them or illegally provide them to others.” At the same time, it also stipulates the legal responsibility of staff members of administrative organs for violating the duty of confidentiality.
• 5. Adjust the articles of relevant Chambers of commerce and associations, and delete “foreign investors” in article 26 of the third draft. The revised version reads, “foreign-invested enterprises may establish and voluntarily participate in Chambers of commerce and associations in accordance with the law. Chambers of commerce and associations carry out relevant activities in accordance with laws, regulations and articles of association to safeguard the legitimate rights and interests of their members. The reason for the revision is that the current foreign-related Chambers of commerce and associations are all composed of foreign-funded enterprises, and the above statement in the draft is not accurate enough.
• 6. Article 30 of the draft is revised to read, “the organizational form, organizational structure and activity criteria of foreign-funded enterprises shall be governed by the provisions of the company law of the People’s Republic of China, the partnership enterprise law of the People’s Republic of China and other laws.” This article is also based on the representative’s proposal that the company law, partnership enterprise law and other laws of market subjects regulate the organizational form and organization of enterprises as well as the behavior of enterprises. The above provisions of the draft are not comprehensive enough, and it is suggested to supplement and improve them.
• 7. The state council is authorized to formulate specific implementation measures for the transition of foreign enterprises. Article 41 (2) of the third draft shall be added with provisions, and the specific implementation measures shall be formulated by the state council. This is based on the suggestion made by some representatives that the adjustment of the organizational form of foreign-funded enterprises involves a wide range of areas and has a great impact, and appropriate arrangements should be made for relevant work so as to avoid unnecessary interference to the normal production and operation activities of foreign-funded enterprises. It is suggested that the state council be authorized to formulate specific implementation measures for the transition of foreign-funded enterprises in light of previous practices.

Bian yongzu, deputy director of the industry department at the chongyang institute of finance at renmin university of China, told reporters that the adjustments put more emphasis on the government serving foreign-funded enterprises and improving the business environment. The revised wording also makes the law more rigorous.

– As of jan 1, 2020, the three highlights are popular

The law on foreign investment has passed the deliberation of the National People’s Congress and will come into force on January 1, 2020. This law will replace the law on foreign-funded joint ventures, the law on foreign-funded enterprises and the law on chinese-foreign contractual joint ventures as the basic laws for China’s utilization of foreign capital. Bian believes that there is still a long period of time between now and January 2020, which allows time for improving a series of relevant laws and regulations and documents, and is conducive to ensuring the smooth and effective implementation of the law.

The provisions of this law on the administration of pre-establishment national treatment plus negative list for foreign investment, the establishment of a level playing field for foreign investment in China, and the protection of intellectual property rights have become the three highlights of the market.

The draft foreign investment law clearly states that the state shall implement a pre-establishment national treatment plus a negative list management system for foreign investment. Wang shouwen, vice-minister of commerce and deputy international trade negotiator, has said this changes the old model of case-by-case approval, meaning that China’s investment environment is more open, stable and transparent for foreign investment. Xiao jiangping, director of the research center for competition law at Peking University, believes that this means that relevant departments and local governments cannot introduce approval measures for market access at will, and that the ban on entry can be truly realized.

In order to ensure equal participation of domestic and foreign investment in market competition, the draft foreign investment law puts forward many specific measures, including “mandatory standards formulated by the state apply equally to foreign-invested enterprises”, “government procurement of products produced by foreign-invested enterprises in China shall be treated equally” and so on. The regulations respond to a long-standing demand from foreign-invested enterprises, said bai chuan mulberry, director of the institute of international economics at the university of international business and economics.

The draft foreign investment law stipulates in the first chapter of general provisions that the state protects the investment, income and other lawful rights and interests of foreign investors in China in accordance with the law, and a special chapter on “investment protection” shall be set up at the same time. Feng fan, director of the law firm, said that providing more protection and convenience to foreign investors in terms of business environment, capital market, intellectual property rights and technology protection will greatly enhance their trust in China’s market and promote the healthy and orderly development of China’s market economy.

The implementation of this law is conducive to attracting more foreign investors to invest in China. Domestic and foreign-funded enterprises will promote and promote each other on the same stage.

– Li keqiang: non-forbidden access for foreign investment will be expanded

In less than three months, the draft foreign investment law has gone through three rounds of review, which has been called by many media as the “acceleration” of the legislation. The rapid adoption of the foreign investment law has also raised some concerns and doubts.

The foreign investment law passed at the second session of the 13th National People’s Congress (NPC) aims to better protect and attract foreign investment through legal means, premier li keqiang said on Tuesday. This law requires the government to carry out its administration in accordance with the law. “It’s an important thing.”

Li said the new negative list will be reduced and will be gradually reduced in the future. We will also strengthen the protection of intellectual property rights by revising the intellectual property law and introducing a punitive compensation mechanism for infringements.

Li further said that we also hope that foreign governments can fairly view the voluntary cooperation between Chinese enterprises and foreign enterprises. China’s opening up measures, often not rolled out in a package, every year or even every quarter, accumulated will bring unimaginable huge changes.

– China’s use of foreign investment has been on the track of the rule of law

Over the past 40 years of reform and opening up, China’s utilization of foreign capital has been expanding in scale and quality and has made remarkable achievements.

Data shows that by the end of 2018, China had set up about 960,000 foreign-funded enterprises, and the cumulative amount of actually used foreign capital exceeded us $2.1 trillion. In 2018, China’s actually utilized foreign capital reached us $134.97 billion (excluding data in the fields of banking, securities and insurance), ranking the second in the world, about 12 times that in 1992 and 150 times that in 1983. In 2018, foreign capital actually used in the service sector and manufacturing accounted for 68.1 percent and 30.5 percent, respectively.

Foreign capital actually used in high-tech industries has increased 16-fold since 1998, accounting for 23.5 percent in 2018. MNCS have invested in more than 2,000 regional headquarters and r&d centers in China. In particular, in 2018, China’s utilization of foreign capital bucked the trend and became the largest among developing countries in the world.

Looking back on history, China’s utilization of foreign capital has been carried out from the very beginning on the track of rule of law. In December 1978, comrade deng xiaoping put forward the formulation of a foreign investment law.

The law on chinese-foreign joint ventures was one of the first seven laws enacted in the new era of reform and opening up in July 1979. In 1986 and 1988, the National People’s Congress enacted the law on foreign-capital enterprises and the law on chinese-foreign contractual joint ventures. The state council, relevant departments and local governments have formulated a large number of implementing and supporting regulations and rules on foreign investment. The aforementioned three laws constitute the three basic laws on the utilization of foreign capital in China, collectively referred to as the “three laws on foreign capital”.

During the period from 2000 to 2016, China’s laws and regulations on foreign trade and economic cooperation were cleaned up and revised on a large scale before and after China’s accession to the wto, and they were revised and improved many times.

In 2013 and 2014, the standing committee of the National People’s Congress (NPC) made decisions twice, authorizing the relevant pilot free trade zones to temporarily adjust the provisions of the “three laws on foreign investment” on the examination and approval of foreign-invested enterprises, and to trial the management method of pre-establishment national treatment plus negative list.

In September 2016, the standing committee of the National People’s Congress (NPC) amended the “three laws on foreign investment” on the basis of summing up the experience of pilot projects.

Since the 18th national congress of the communist party of China (CPC), the CPC central committee with comrade xi jinping at the core has made a series of important decisions and arrangements in expanding opening-up and promoting foreign investment.

Under the new situation, the related regulations of the “three laws on foreign capital” have been gradually covered by the laws of the company law, partnership enterprise law, general principles of civil law, property law, contract law and other market subjects and market transactions.

At the same time, the requirements of comprehensively strengthening the promotion and protection of foreign investment and further regulating the management of foreign investment under the new situation also go far beyond the adjustment scope of the “three laws on foreign investment”.

The NPC standing committee attaches great importance to the legislative work on foreign investment, and the legislative planning and 2018 legislative work plan of the NPC standing committee clearly put forward the formulation of a law on foreign investment. In December 2018, the state council submitted a draft foreign investment law to the standing committee of the National People’s Congress for deliberation.

In the first two months, foreign investment actually used continued to grow steadily, with U.S. investment in China increasing by 44.3 percent.

Statistics show that last year, more than 60,000 foreign-funded enterprises were set up in China, up nearly 70 percent year-on-year, and the actual use of foreign capital reached a record high of 885.6 billion yuan.

According to data released by the ministry of commerce on January 15, 6,509 foreign-invested enterprises were set up in China from January to February. Actual foreign investment reached 147.11 billion yuan, up 5.5 percent year-on-year. That was equivalent to us $21.69 billion, up 3.0 percent year-on-year. Banking, securities and insurance data are not included.

– China’s actual use of foreign capital continued to grow steadily in the first two months, the head of the foreign investment department of the ministry of commerce said Tuesday.

In terms of industry categories, foreign investment in high-tech manufacturing and high-tech service industries both showed growth. Foreign capital actually used in high-tech industries increased by 48.4 percent year-on-year, accounting for 27.6 percent of the total.

Actual foreign investment in high-tech manufacturing reached 15.91 billion yuan, up 9.3 percent year-on-year. Among them, the actual use of foreign capital in aviation, spacecraft and equipment manufacturing, electronics and communication equipment manufacturing, and computer and office equipment manufacturing increased by 252.7 percent, 21.2 percent and 253.1 percent year-on-year.

The actual use of foreign capital in high-tech services reached 24.67 billion yuan, up 92.9 percent year-on-year. Information services, research and development and design services and transformation of scientific and technological achievements increased by 101.9 percent, 29.2 percent and 76.4 percent, respectively, year-on-year

In terms of regions, 11.8 billion yuan of foreign investment was actually used in the central region, up by 6.6% year-on-year. Actual foreign investment in the pilot free trade zones increased by 35.1 percent year-on-year, accounting for 12 percent. Pilot free trade zones led the country in growth.

By country, us investment in China increased by 44.3 percent, maintaining a relatively fast momentum. Meanwhile, the growth rates of the Netherlands and France both exceeded 100%.

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