Published: Sun, March 17, 2019
Worldwide | By Jermaine Blake

China foreign investment law: Bill aims to ease global concerns

China foreign investment law: Bill aims to ease global concerns

China's parliament voted on Friday to approve a new foreign investment law.

Delegates at the country's annual National People's Congress voted for the new law by a landslide, with 2,929 votes in favour, eight against the law change, and eight delegates abstaining.

It comes roughly three months after a first draft was discussed, a particularly fast turnaround in China, as Washington and Beijing work to resolve their trade dispute.

The abrupt return and rapid approval of the new rules come as China is trying to negotiate an end to its trade war with the United States. "It's a clear signal from China to the U.S. and Europe that Beijing is taking further steps toward market opening".

The world's two largest economies are locked in a trade war since Trump imposed heavy tariffs on imported steel and aluminium items from China in March previous year. The tit-for-tat tariffs and rising protectionist tendencies have hurt business sentiment worldwide and stoked uncertainty.

The law will go into effect on January 1, 2020.

Beijing sees the law as a tool to attract more foreign investment as its economy slows, with the government last week presenting a growth target of 6.0 to 6.5% this year, down from 6.6% growth in 2018.

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The law also has clear positions on the protection of foreign investors' rights regarding issues such as intellectual property rights protection and technology transfer that are of common concern to foreign investors, Zhang said.

China is also to amend its intellectual property law and "introduce a punitive damages mechanism to ensure that all infringements will be seriously dealt with", Chinese Premier Li Keqiang (李克強) told reporters at the end of the legislature's two-week session.

But Western observers remain skeptical.

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. He added that "the law offers a more broad-based retaliation". "All laws and regulations will continue to provide the Communist Party of China (CPC) with a great deal of room for maneuver to intervene, albeit not explicitly", she underlined. CNBC reported that American Chamber of Commerce policy chair Lester Ross said, "It's not giving this adequate time for public comment from AmCham (and foreign businesses)". The chamber noted that the clause gives China power to take "unilateral action against trading and investment partners based on a principle of perceived negative reciprocity".

In addition to the law's mandate of "equal treatment" of foreign and domestic companies, another notable element includes making nationwide the so-called negative list - which defines which industries or activities foreign businesses are able to operate in. By the end of 2018, China had set up about 960,000 foreign-invested enterprises with an accumulated total of more than 2.1 trillion US dollars of foreign capital utilized.

The law, created to ease concerns among foreign companies about the difficulties they face in China, will ban forced technology transfer and illegal government "interference" in foreign business practices.

The new act mandates an antitrust review for mergers and acquisitions.

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