| Foreign Investment Law of the People's Republic of China | |
|---|---|
 | |
| National People's Congress | |
| |
| Citation | Foreign Investment Law (English) |
| Territorial extent | People's Republic of China but excludes China's Special Administrative Regions. |
| Enacted by | 13th National People's Congress |
| Enacted | March 15, 2019 |
| Commenced | January 1, 2020 |
| Summary | |
| A law formulated on the basis of the Constitution to further expand the scope of opening-up, promote foreign investment, protect the lawful rights and interests of foreign investment, standardize the regulation of foreign investment, make new ground in opening up on all fronts, and promote the healthy development of the socialist market economy. | |
| Keywords | |
| Foreign direct investment, Trade, Chinese law | |
| Status: In force | |
The Foreign Investment Law[1] is a law of the People's Republic of China governing foreign direct investment in China. The law was adopted by the National People's Congress on March 15, 2019, and came into effect on January 1, 2020. It replaces 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.
Soon after China's reform and opening up, the country adopted its first law on equity joint ventures in 1979, and the laws on wholly foreign-owned enterprises and cooperative joint ventures were enacted in the 1980s. Over the past decades, they have provided legal safeguards for foreign firms and promoted foreign investment and cooperation in China. As China becomes one of the world's top recipients of FDI, with some 960,000 foreign-invested enterprises and over 2.1 trillion US dollars of accumulated FDI by the end of 2018, the legal framework for foreign investment needed to be updated in order for further reform and opening up.[2]
The unified Foreign Investment Law, replacing the three existing laws, was adopted at the Second Session of the 13th National People's Congress on March 15, 2019, and came into effect on January 1, 2020.
The Foreign Investment Law calls for the gradual elimination of caps on foreign ownership in key Chinese industries, including oil and gas exploration, nuclear fuel production, and some parts of the finance sector.[3]: 84
The Law's key provisions are as follows:[1]
Wang Chen, vice chairman of the NPC Standing Committee, said the Law shows China's will and determination to follow through with reform and opening up in a new historical context, and that "it is a full testament to China's determination and confidence in opening wider to the outside world and promoting foreign investment in the new era."[2]
Vivian Jiang, vice chair of Deloitte China, said the Law sends the signal of "greater transparency", and will "boost Chinese market's appeal to foreign capital."[2]
Joerg Wuttke, president of the European Union Chamber of Commerce in China, said the Law puts a "strong emphasis on preventing Chinese entities from forcing foreign companies to transfer valuable technology" in order to do business in China, while improving protection of trade secrets.[5]
In the view of economist Stephen Roach, the Law's call for the phasing out of caps on foreign ownership in various key industries reduces the need for joint ventures in China and promotes direct acquisitions by foreign enterprises.[3]: 84
Jake Parker, senior vice president at the U.S.-China Business Council, said the Law still falls short of "specifying what kinds of trade secret disclosures will be prohibited, and clarifying which kinds of administrative departments the provisions on technology transfer may apply to." It is also "vague on how communication channels between government agencies and foreign entities will be managed, and how feedback will be incorporated."[5]
