Chinese Parliament approves foreign investment law to ease global concerns

China-US trade war: New Chinese law seeks to address concerns

After almost four years of discussion and revision, the Foreign Investment Law, a legal basis for the utilization of foreign capital in China in the new era, was finally passed at the second session of the 13th National People's Congress on the March 15. Today, it finally passed a new law that opens up vast swathes of its economy to foreign businesses.

China's parliament, the National People's Congress (NPC), concluded its 10-day annual session on Friday by adopting the law.

The move comes as United States and Chinese negotiators hold complex talks aimed at resolving a months-long trade war that has pounded businesses with tariffs on $360 billion in two-way commerce.

Some law experts and business consultants have expressed skepticism about how effective the law will be in protecting foreign firms from compelled technology transfers, given a lack of rule of law in China.

Moreover, the China (Shanghai) Pilot Free Trade Zone, established in 2013, together with another 11 FTZs, has been actively exploring new approaches to managing foreign investment.

The Chinese government will also strengthen the protection of intellectual property rights, particularly for technology firms that will invest in China.

The law will come into effect on January 1, 2020, the state news agency said.

Chinese Premier Li Keqiang said China further eased its policies to attract foreign investments to the country. Wang said that China "has never nationalized any foreign investment project" since it began opening up the Chinese economy to the world more than 40 years ago.

Jacob Parker, vice president of China operations at the US-China business Council in Beijing, said his group was pleased with the last-minute changes to further protect foreign firms' commercial information.

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Li said China will soon announce shorter negative lists and continue to trim them in future, "increasing the scope of what is not prohibited".

But, he added, the changes "only address a small slice of the overall set of concerns our members have about the uneven playing field foreign companies encounter in China".

"Not allowing the economy to slip out of a reasonable range, that is to say we will not allow waves of layoffs", said Li, adding the government will provide support to firms creating the most jobs.

Businesses are still concerned that industry-specific laws and local administrative approvals may impede full market access despite provisions in the negative list.

China's economic slowdown and the ongoing trade war with the United States topped the agenda of Chinese legislators who gathered in Beijing.

"While not all of our concerns were addressed in this law, it is time to move forward", he added.

The law will help create much better conditions for foreign investors and help them plan long-term returns on investments in China, Ohoven told Xinhua.

"Enforcement will be the key metric for evaluating success, but the business community has collectively advocated for years for the Chinese government to impose criminal penalties for infringement, we need to recognise this positive progress to that end".

"I think we can safely assume that this language is a result of the trade negotiations as it was slipped in at the last minute".

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