China’s national legislature on Friday passed the Foreign Investment Law in Beijing on March 15, 2019. This landmark legislation aims to provide stronger protection and a better business environment for overseas investors.
With unified provisions for the entry, promotion, protection, and management of foreign investment, it is a new and fundamental law for foreign investment in China.
It aims to improve the transparency of foreign investment policies and ensure that foreign-invested enterprises participate in market competition on an equal basis.
Let’s see the main content:
1.Identity of foreign investment
foreign investment refers to investment activity within the territory of China，directly or indirectly conducted by foreign natural persons, enterprises and other organizations (the “foreign investors”), including the following circumstances:
1) a foreign investor establishes a foreign-funded enterprise, independently or together with any other investor; and
2) a foreign investor acquires shares, equities, property shares or any other similar rights and interests of an enterprise within the territory of China; and
3) a foreign investor invests in any new construction project, independently or together with any other investor; and
4) other foreign investment within the territory of China in any other way stipulated under laws, administrative regulations or provisions of the State Council.
The above mentioned foreign-funded enterprise refers to an enterprise incorporated under Chinese laws within the territory of China and with all or part of its investment from a foreign investor.
2. Market Entry
The State shall implement the management systems of pre-establishment national treatment and negative list for foreign investment; save as otherwise provided under international treaties or agreements that the People’s Republic of China concludes or joins in, such provisions shall prevail.
For the purpose of the preceding paragraph, the negative list refers to special administrative measures for access of foreign investment in specific fields as stipulated by the State. The negative list will be issued by or upon approval by the State Council.
3. Investment Protection
The State shall protect foreign investors’ investment, earnings and other legitimate rights and interests within the territory of China according to the law.
4. Standardization Work
Foreign-funded enterprises shall equally participate in standardization work, and information disclosure and social supervision shall be reinforced for the formulation of standards.
The compulsory standards formulated by the State shall equally apply to foreign-funded enterprises.
5. Government Procurement
The State shall guarantee foreign-funded enterprises’ fair participation in government procurement activities. Products produced by foreign-funded enterprises within the territory of China shall be equally treated under government procurement.
6.Intellectual Property Rights Protection
The State shall, according to the law, protect the intellectual property rights of foreign investors and foreign-funded enterprises, protect the legitimate rights and interests of holders of intellectual property rights and the relevant right holders, and encourage technology cooperation on the basis of free will and business rules.
In the process of foreign investment, technology cooperation conditions shall be determined by all investment parties upon negotiation, and no administrative organ or functionary working therein shall force the transfer of technologies by administrative means.
7. Effective Date
The Law shall come into force as of 1st of Jan, 2020. The Law of the People’s Republic of China on Sino-foreign Equity Joint Ventures, the Law of the People’s Republic of China on Wholly Foreign-owned Enterprises and the Law of the People’s Republic of China on Sino-foreign Cooperative Joint Ventures shall be annulled simultaneously.
