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China adopts Foreign Investment Law
Published on: 2019-03-18
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018China approved its new foreign investment law on Friday, sending the message that Beijing wants to level the playing field for overseas investors and reassure the global community it remains an attractive investment destination.
 

The final draft of foreign investment law was approved by 2929 National People’s Congress lawmakers in the Great Hall of the People, with eight opposing the measures and eight abstaining.

013Officials sing the national anthem at the closing session of the National People's Congress (NPC) at the Great Hall of the People in Beijing, China March 15, 2019.

Beijing rushed the legislation through the country’s largely ceremonial legislature in an effort to fend off complaints from the United States and Europe about unfair trade practices. The new law was first introduced as a draft in 2015, but its progress picked up markedly from the middle of last year to address issues identified by Washington as part of the US-China trade war.

017The law attempts to address outstanding concerns from foreign investors, such as unfair treatment in terms of market access and government procurement, forced technology transfer to Chinese partners and the theft of commercial secrets from foreign businesses in China.
 

It was amended to make it clear that officials will be obliged to protect commercially confidential information they obtain from overseas businesses. The law will make it illegal for officials to misuse critical information or to provide it to local firms.

014A worker welds a liquefied natural gas (LNG) tank at a factory in Nantong

At the same time, the wording of the law, which will replace three foreign capital laws – the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Contractual Joint Ventures and the Law on Foreign-Capital Enterprises – passed between 1979 and 1990 in the early years of China’s process of reform and opening up, is quite general, leaving many details to be addressed in other regulations and implementation procedures.

016The law does not specifically mention investment from Hong Kong, Taiwan and Macau, but it will apply to and will not change the legal status of investments from Hong Kong, Macau and Taiwan – specifically, that they would still be considered “foreign” investments.

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