China Set to Finalise Uniform Law to Streamline Foreign Direct Investment

China’s commitment to increased economic openness and continual reform and opening up has provided an anchor of stability for the world economy at a time when those who underestimated China’s determination to fulfil the ideals of perpetual reform, adaptive changes to present needs and expedited opening up, may have mistakenly assumed that China would retreat behind the walls of protectionism as the United States and some in Europe have done.

Instead, China is making it easier than ever for foreigners to being in not just new imports to China’s market, but new capital investments. In addition to making preparations for the second ever China International Import Expo, The Standing Committee of the National People’s Congress (NPC) is preparing to finalise a new piece of legislation on expanding the path of foreign direct investment (FDI) into China in a manner that streamlines existing legislation whilst expanding the scope of new forms of FDI entering the country.

According to a report on the new law from The China People’s Daily:

“Once adopted, the unified law will replace three existing laws on Chinese-foreign equity joint ventures, non-equity joint ventures (or contractual joint ventures) and wholly foreign-owned enterprises.

By the end of October 2018, a total of nearly 950,000 foreign-funded companies had registered in China, bringing in an accumulated investment of over 2.1 trillion U.S. dollars and performing as major driving forces in China’s economic and social development.

Li Zhanshu, chairman of the NPC Standing Committee, on Tuesday presided over a plenary meeting during the ongoing session, at which lawmakers were briefed on the amendments.

By explicitly formulating rules on transparency, government procurement and capital market, the new draft law has complemented the legal system concerning foreign affairs and responded to overseas concerns, said Li Yuefeng, a member of the NPC Standing Committee, during panel discussions”.

The report continues, detailing how the new law looks to create a level playing field for investors into China looking to reap the benefits of a fully transparent and rules based FRI regime:

“Definitions of the terms are included in the article, in addition to a clause requiring the state to give national treatment to foreign investments outside the negative list.

It also stipulates that foreign-invested enterprises have equal access to favourable policies for enterprises.

In line with provisions in the Constitution, the new draft proposes that the state shall not expropriate or requisition foreign investment, except under particular circumstances and in the public interest.

If the state expropriates or requisitions foreign investment, “due legal procedures must be followed while prompt, fair and reasonable compensation should be made,” it notes.

The new draft also includes regulations regarding antitrust examination on mergers and acquisitions by foreign businesses and penalties on failure to report their investment information to related authorities”.

China is already the world’s number one recipient of FDI as China’s pro-innovation market reforms and pivot away from a mass production model towards an economic model based on high quality development, hi-tech research, artificial intelligence, robotics, medical innovation, digital modernisation and scientific excellence, has caught the eye of global investors who seek to remain at the forefront of new economic and technological developments.

For China, the economic theme of 2019 continues to be one of peace through prosperity that is made possible by opening up free trading and investment avenues to a diverse set of economic partners. This is true not only in terms of goods but also in terms of foreign direct investment and services. For Chinese companies, the atmosphere of intensified economic openness presents opportunities to partner with new foreign companies on joint projects in fields ranging from hi-technology to consumer electronics, art and design, as well as cars, trains and aeronautics.

For the foreign corporation looking to partner with Chinese companies at the forefront of artificial intelligence, modern medicine, micro and nano technology, 5G network building and high speed rail, an era of further openness looks to benefit economies throughout the world. Finally,  people-centred projects will help to make these progressive trends in the improved material condition of multiple economies benefit the people directly through improved living standards.

For Chinese consumers, freer trade in respect of imports will mean an ever growing diversity of options at all levels of the economy while China’s goal of further reciprocal free trade agreements will lead to healthy economic exchange at both a corporate level and at the level of individual entrepreneurs. Furthermore, such agreements will help to create new job among all partner nations engaged in freer trading arrangements with China and its vast consumer base.

In terms of the geopolitical climate, China continues to demonstrate that its openness to new imports is a readily available opportunity for any and all partners. In respect of the United States, the only country keeping American exports out of the Chinese market is the United States government itself. By launching a malicious trade war against China at the very time that China seeks to open its markets to the entire world, the US is scoring an own goal by doing to its own agricultural, technological and automotive exporters what it falsely accuses China of doing- namely prohibiting them access to China’s markets.

But beyond China’s openness to both trade and FDI, an economy with open doors is not only beneficial for multiple world economies vis-a-vis systems with an upturned drawbridge, but it is also beneficial to global peace and stability.

By welcoming ever more FDI on a streamlined model, China invites the world to experience win-win cooperation whereby both domestic and foreign investors will be able to power the engine of innovation and reform that is rapidly transforming China’s economy as it prepares to enter a new age of supreme creativity and exploration into new technology driven sectors that look to re-shape living standards in a positive way during the remainder of the 21st century.

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