On March 15, the Chinese People’s Congress passed the Foreign Investment Law of the People’s Republic of China. The formulation of this fundamental law governing foreign investment is of milestone significance in China’s 40-year journey of opening up to the outside world.
It is also one of China’s significant initiatives to open its door even wider, to boost foreign investment, to protect the legal rights of the foreign investors and to regulate the administration and management system for foreign investment. It serves as a powerful legal guarantor for a higher level of openness. This new law has attracted the attention of governments and businesses worldwide.
There are five major points in this new law:
1) Further clarification of the principle of equal treatment to both domestic and foreign businesses.
Article 15 stipulates that “pursuant to the law, the equal participation of foreign capital enterprises in the formulation of standards will be ensured.” Article 16 stipulates that “pursuant to the law the foreign capital enterprises can participate in fair competition for government procurement bidding. The products and services provided by foreign capital enterprises within China will receive equal treatment in government procurement process.”
These relevant articles are in response to the concerns of foreign capital enterprises and convey a clearer signal in procurement and standard formulation, which will make the Chinese market even more attractive to the foreign investment.
2) Foreign investors will be treated no less favourably than domestic investors in the investment access stage, except in areas specified in China’s Market Access Negative List.
This new law includes both the Pre-entry National Treatment and the Negative List for foreign investment as its basic management system. Beyond the Negative List, no threshold will be set and no special management will be enforced for the foreign investors who can make their investment, establish and conduct their business operation and receive supervision in the same manner as their domestic counterparts. Totally different from the old system, which was based on a case-by-case approval approach, this is a new management system for foreign investment.
3) Protection of intellectual property.
The new law provides a clear-cut response to concerns about the safeguarding of intellectual property in China. Article 22 stipulates that “the intellectual properties of the foreign investors and foreign investment businesses are to be protected; the legal rights and interests of the owners and relevant right holders of intellectual properties are to be protected as well.”
With regard to the issue of technical co-operation, it clearly stipulates that “technical co-operation based on voluntary intent and following the business practices” and “any administrative agency or its personnel are prohibited from forcing technological transfer from foreign companies operating in China.”
4) The establishment of a healthy and comprehensive service system for foreign investment.
Article 11 stipulates “consultancy and services will be provided for foreign investors and foreign capital enterprises in areas such as laws and regulations, policies and measures, and investment project information.” This system will effectively push the government to adjust some of its functions, establish communication channels between governments and businesses to enable the governments to provide more services and support for these businesses. For foreign capital enterprises, this can help them understand various Chinese laws and regulations better and catch the market trend faster, and improve their business competitiveness.
5) The establishment of a reporting system of foreign investment information.
Taking into account the established international practices, this new law sets up a reporting system of foreign investment information, which requires that the foreign investors and foreign capital enterprises report their relevant investment information that will serve as the basic data for reference in the formulation of foreign investment policies and in their management. The Principle of Least Burdens is also applied. Based on the information sharing principle, no extra reporting burdens will be added to the foreign capital enterprises for information that can be retrieved from business and taxation registration and other channels.
There are 42 articles making up the principal contents of the new law, and several corresponding bylaws will be enacted during the process of its enforcement. The key features of the process are: openness, transparency and predictability. It will be open to the foreign investors and foreign capital enterprises in due course for their opinions and feedback. By then the foreign investors will have ample opportunity to express their views and expectations.
China today is at a critical historical juncture of a great national renaissance in an ever-changing world unprecedented in the last century. It is only natural and unavoidable for a growing and stronger China to experience some rough waters and sustain some stormy attacks on her historical voyage. However, China’s determination to defend her sovereignty, national security and development interest is rock solid. We have the capability to defend our national interest. In the meantime, our commitment to non-stop reform and further openness will not be deterred. China’s sustained efforts in promoting free and convenient investment and mutually beneficial economic globalization will continue. As always, China welcomes foreign businesses to come to China to invest and to develop mutually beneficial cooperation.
Over 14,000 Canadian businesses are currently investing and operating in China. We sincerely invite even more Canadian businesses to China for investment and co-operation, in a joint effort to bring the economic and trade relationship between our two countries to a brand new level.
Tong Xiaoling is the Consul General of the People’s Republic of China in Vancouver. These remarks are excerpted from her address on May 22 to the Canada International Trade Promotion Society.
