China’s draft foreign investment law, which will be submitted to the upcoming plenary session of the National People’s Congress for review, is expected to be approved and provide a streamlined basic law framework to promote foreign investment, experts and company executives said.
The legislative pace of the proposed law, which is designed to bolster the opening-up of the Chinese economy, has been comparatively fast. The Standing Committee of the NPC conducted two rounds of reviews within little more than a month, in late December and late January.
Once implemented, the law will replace three existing laws on Chinese-foreign equity joint ventures, non-equity joint ventures and wholly foreign-owned enterprises, which were mainly legislated between 1979 and 1988 and then revised.
“The draft law reflects experience on foreign investment governance that China has accumulated over the past decade, and it sets up a comprehensive basic law framework that resonates well with China’s current situation in attracting foreign investment,” said Cui Fan, a professor at the University of International Business and Economics.
“When the three old laws were made, foreign investment came to China mainly because of the low human resources cost, but now China’s huge market potential is much more alluring.”
In addition, as globalization goes further, competition between countries and regions is intensifying, which has induced China to further adjust laws and regulations to create a better environment for foreign investment, he said.
Cui spoke highly of the draft law, which he said demonstrates China’s current principles in governing foreign investment to ensure it receives treatment equal to that of Chinese companies in most phases.
Wang Wenhua, professor at the Law School of Beijing Foreign Studies University, said the legal community generally agrees that the legislation is necessary and feasible.
Once adopted, the law will play a significant role in encouraging more investments, especially those with key strengths and vision, she said.
“We are now facing a new situation and new challenges at both home and abroad. The draft law is sending a clear message that China is determined to further deepen its opening-up and reform as well as uphold the rule of law,” Wang said.
“Integrating a series of foreign investment policies and current law, the new measure will boost foreign investors’ confidence, further open up markets and create a better business environment.”
Leon Wang, executive vice-president of global biopharmaceutical giant AstraZeneca PLC, believes the draft provides a more solid guarantee of the rights of foreign companies at the legal level, creating a more open, fair and transparent investment environment in China.
“We have witnessed and deeply felt the strong support of government in policies, talent and resources to create a friendly environment for the long-term development of foreign companies in China,” Wang said.
“An optimized market as well as a positive and dynamic investment climate will maximize innovation, attract overseas resources and promote the cooperation of foreign and domestic companies.”