Regulation gives teeth to Foreign Investment Law

China approved a draft regulation on implementing the Foreign Investment Law at a State Council executive meeting presided over by Premier Li Keqiang on Dec 12.

The regulation, with detailed administrative measures on protecting foreign investment, will take effect on Jan 1, along with the Foreign Investment Law.

The regulation requires that domestic and foreign enterprises be treated in an equal way in areas such as project applications, land supply, taxation and fee cuts.

Foreign businesses will also be able to participate equally in formulating and revising national, industrial and local standards in accordance with the law.

According to the regulation, governments and related departments should not prevent foreign companies from entering the government procurement market or discriminate against them.

In order to strengthen foreign investment protection, the regulation says foreign investment should not be requisitioned by the State. In special cases, where requisition is necessary for the public interest, legal procedures and provisions should be followed, and compensation should be paid based on market value.

It also prohibits forcing foreign investors and companies to transfer their technology, either through licenses, the threat of penalties or other means.

No discriminatory requirements will be allowed to be set for foreign investors in terms of licensing conditions, application materials, review procedures and time limits when the authorities review applications for market-access licenses in a range of industries and fields.

The regulation also specifies the legal responsibilities for violations resulting in unequal treatment of foreign enterprises, restrictions on foreign companies' equal participation in setting standards, failure to implement policy commitments and forced technology transfer.

Investors from Hong Kong and Macao will be able to refer to the Foreign Investment Law and the regulation when they make investments in the Chinese mainland, the regulation said.

For investment in the mainland by investors from Taiwan, the Law on the Protection of Investment by Taiwan Compatriots and its implementing regulation should be applied, and matters not covered should be addressed by reference to the Foreign Investment Law and its implementing regulation.

Lower financing costs for smaller businesses

China will take measures to further lower the financing costs for small and micro-sized businesses, the State Council decided at an executive meeting on Dec 12.

Noting that small and microsized companies play an important role in developing the economy and creating jobs, the meeting decided to bring down overall financing costs of inclusive loans for small and microsized businesses by 0.5 percentage points next year, and make sure that inclusive loans continue to grow faster than overall loans, and that such loans issued by the five major State-owned commercial banks increase by no less than 20 percent.

Inclusive loans are those provided to small and micro-sized businesses at an affordable cost.

Banks will also be supported in increasing medium-and long-term loans to manufacturers, and developing credit loans and services that facilitate the rollover of outstanding loans.

By the end of October, the balance of inclusive loans to small and micro-sized businesses rose by 23.3 percent year-on-year, nearly 11 percentage points higher than overall loan growth.