China Foreign Investment LawPassed and Taking Effect on January 1, 2020

发布时间：2019.03.26

On March 15, 2019, the Second Session of the 13th National People’s Congress reviewed and passed the Foreign Investment Law of the People’s Republic of China (hereinafter referred to as China Foreign Investment Law), a new law aimed at promoting, protecting and managing foreign investment. It will take effect on January 1, 2020. Since the Ministry of Commerce announced the Foreign Investment Law of the People’s Republic of China (Draft for Soliciting Opinions) in January 2015, after four years of discussion and revision, China Foreign Investment Law was currently reviewed and passed, and is to replace three previous laws,namelythe Chinese-Foreign Equity Joint Ventures Law,the Wholly Foreign-Owned Enterprises Law and theChinese-Foreign Contractual Joint Ventures Law.

As early as the 1970s and 1980s, the three previous laws were respectively issued for the three different types of foreign ventures in China. However, with the gradual improvement of corporate organization laws such as the domestic company law, the three previous lawsbegan falling behind the new economic system. On the other hand, such issues as overlapping and conflicts betweenthe three previous laws and the post-established corporate organization law remainunresolved, as well as the controversial gap lying ahead of foreign investors and domestic investorsunderthe framework over thethree previous laws. Against such a background,addressing the concerns of economic situations both at home and foreign businesses and governments, China Foreign Investment Law, to stand as a basic law for foreign investors,establishes a general rule of “pre-entry national treatment plus negative list management system” for foreign investment, under which the previousinvestment case-by-case approval system underthe three previous lawswill convert into a universal filing system and an approval system directed by the negative list, which will increase the liberalization and facilitation of foreign investment not falling under the negative list.

In addition, China Foreign Investment Law aims tofurther optimize of the foreign investment environment by focusing on the correction and regulation of government supervision behaviors.In regulations of the new law reflected is a significant tendencyof de-administrative and de-subjective in the government’s supervision, whileadvocating market leading forces. Amongst several issues, that forced technology transfers as read from the previous three laws is now clarified by China Foreign Investment Law, which encourages to carry out technical cooperation on a voluntary principle and according to business rules, and it will ban for the administrative to use administrative means to force transfer of technology, providing a legal basis for the protection of intellectual property rights of enterprises involving foreign investment.

The formulation of the new Foreign Investment Law is a signal sent from Chinato the world that the country will continue to devote to promote trade liberalization and investment facilitation. The new law is also one necessary measures taken preparing Chinato improve its legal system to join higher-level bilateral or multilateral trade agreements in the future. The newly born law has set out the general principles, yetmore specific implementation regulations and rules such as addressing the negative list as well as issues arising from the transition period are expected to come in place in the near future.

We will continue to pay close attention to the formulation process and publication of relevant regulations and rules and give our report.