P. 6

China’s New Foreign
Investment Law

China’s National People’s Congress closed out the In the closing press conference of the Two
Two Sessions meetings by passing a new Foreign Sessions, Premier Li Keqiang explained that the law
Investment Law. It will come into effect on January 1, is part of China’s “fundamental state policy” to open
2020 and is a new guiding document to govern foreign up to the world.
investment in China.
According to Li, “This piece of legislation is designed
The new law was passed only three months after being to better protect and attract foreign investment
brought back onto the agenda by Chinese policymakers. through legislative means.”
An earlier version of the draft law was initially
introduced in 2015, but was put on the back-burner due Specifically, the Foreign Investment Law contains a
to disagreements on its content. number of provisions that pledge to give foreign investors a
level playing field with their domestic counterparts.
Observers believe the law’s sudden rush to the
spotlight is an attempt by the Chinese government to For example, it explicitly bars Chinese JV partners
respond to international criticism from the US and from stealing IP and commercial secrets from their
others about China’s openness – or lack thereof – to foreign partners via protections included in Article 22.
foreign businesses.

The new Foreign Investment Law seeks to address
common complaints from foreign businesses and
governments, such as by explicitly banning forced
technology transfers.

Critics, however, point out that the law – as it stands – still
does not go far enough in addressing their concerns. The
law’s vague wording means that foreign investors will need
to wait and see to determine what it means in practice.

What do we know about the new
Foreign Investment Law?

The Foreign Investment Law will govern the activities
of all individual foreign investors and foreign-invested
enterprises (FIEs), which include both wholly foreign-
owned enterprises (WFOEs) and Sino-foreign joint
ventures (JVs). It also includes investors originating
from Hong Kong, Macau, and Taiwan.

It replaces three previous laws, namely the Wholly
Foreign-Owned Enterprises Law (also known as the
Foreign-Capital Enterprises Law), the Sino-Foreign
Equity Joint Ventures Law, and the Sino-Foreign
Contractual Joint Ventures Law.

The new law pledges to “build a market environment
of stability, transparency, predictability, and fair
competition” for foreign investors.

3 AmCham South China
   1   2   3   4   5   6   7   8   9   10   11