ANNOUNCEMENT 15 Mar 2019

March 15th, 2019 - The Chinese government ratified a new law governing the rules for foreign investments in the country.

NUMBER OF INTERVENTIONS

2

  • 0 harmful
  • 1 neutral
  • 1 liberalising

SOURCE

PRC National People's Congress, March 15th, 2019. (中华人民共和国外商投资法)
http://www.npc.gov.cn/npc/c30834/201903/121916e4943f416b8b0ea12e0714d683.shtml

Ibid., December 2018. 'Establishment of the Foreign Investment Law' (外商投资法立法)
http://www.npc.gov.cn/npc/c35805/wstzfca_list.shtml

Inception date: 01 Jan 2020 | Removal date: open ended

FDI: Treatment and operations, nes

On March 15th, 2019, the Chinese National People's Congress (NPC) rubber-stamped the ratification of a new law (hereafter, the 'New Law') governing the rules surrounding foreign investments in the country.

The New Law abolishes three old ones established over 20 years previously. It is difficult to summarise what has changed, as a lot of the text in the New Law is vague in nature. In the time until it comes into effect (January 1st 2020), it is up to the Chinese State Council to draw up more specific policies to act on the provisions described in the New Law.

Key points included in the New Law which can be seen as liberalising are as follows:

  • Enaction of 'pre-establishment national treatment and negative list'. This system is intended to ensure that foreign investors will be treated the same as their Chinese counterparts when making investments in the PRC, except for in sectors specified on a 'negative list' of foreign investments (see related act);
  • Registration, not approval. Switch to a system of 'invest first, register later', rather than 'ask for approval first, then invest', for foreign investors investing in sectors not on the aforementioned negative list;
  • Specific provisions to protect rights of foreign-invested enterprises (FIEs), as follows:
    • Stringent protection of FIEs' intellectual property rights;
    • Free transfer of RMB and other currencies into and out of the PRC for returns of capital, profits, capital gains, royalty payments, and other lawfully obtained compensation;
    • Excepting extenuating circumstances, no expropriation of foreign-owned assets.

There is also repeated assurance on the Chinese government's commitment to 'opening up' the economy.

The New Law was fast-tracked into approval, which many take to be in view of improving China's negotiating position in the ongoing China-US trade talks.

This intervention is classified as horizontal due to a lack of specific sectoral scope.

AFFECTED SECTORS

 
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AFFECTED PRODUCTS

 
N/A
Inception date: 01 Jan 2020 | Removal date: open ended

FDI: Treatment and operations, nes

The 'New Foreign Investment Law' (hereafter, the 'New Law'), rubber-stamped into effect by the Chinese National People's Congress on March 15th, 2019, also contained some provisions which were of questionable value from the perspective of foreign investors, specifically:

  • Foreign investments must be wary of national security review system. This is a system put in place, along with the 'Negative List' (see related act) that aims to ensure foreign investments are not at odds with China's national security concerns;
  • An assurance that China will retaliate in kind against measures enacted by foreign countries which disadvantage Chinese investors (in the final chapter of the New Law).
 
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