The Foreign Investment Law of the People’s Republic of China, adopted at the Second Session of the 13th National People’s Congress on March 15, is set for implementation on January 1, 2020.

The basic law for foreign investment in China, it has clear provisions on the definition of foreign investment and investment promotion, protection and management, providing legal protection for a higher level of comprehensive opening up.

The three existing laws on Chinese-foreign equity joint ventures, wholly foreign-owned enterprises and Chinese-foreign contractual joint ventures will be replaced by the Foreign Investment Law.

China did not have a law governing foreign investment before the introduction of the Foreign Investment Law, said Sheng Bin, dean of the School of Economics at Nankai University. The laws and regulations formulated earlier in related fields were fragmented, failing to reflect the new ideas, trends and models of changes in international foreign policy.

The Foreign Investment Law better dovetails with international rules, said Lu Jiongxing, a professor from the School of Law at Xiamen University. The law stipulates the implementation of a foreign investment management system addressing pre-entry national treatment to include a foreign investment negative list. Referring to multilateral and bilateral agreements on foreign investment, the law has a chapter on investment promotion and protection respectively.

The law also treats foreign and domestic enterprises equally, Lu continued. While protecting foreign investors’ rights to invest and benefit and other legitimate rights and interests in China according to law, it also stipulates the corresponding obligations and responsibilities of foreign investors.

The formulation of the Foreign Investment Law has conformed to the inherent needs of China’s economic development, said Zhang Yuyan, Member of the Chinese Academy of Social Sciences (CASS) and director of CASS’s Institute of World Economics and Politics. China is a developing country where foreign capital, especially technology-intensive foreign capital, will play an important role in driving economic growth for a long time. As such, it is necessary to create a sound investment environment for foreign investors.

At the same time, the Foreign Investment Law helps minimize uncertainty, reduce transaction costs and respond to the concerns of the international community regarding policy transparency, intellectual property protection and a level playing field in China, Zhang concluded.

Wu Xianman, director of the Jiangsu Provincial Financial Research Institute, said that the Foreign Investment Law focuses on the comprehensive management of the entire process of foreign investment activities. Whether it be the introduction of investment and the use of funds in China, or the benefits of capital entering China’s production and operation environment, there need to be regulations to abide by.

The law mainly targets real-economy investment, focusing on the industrial, commercial, agricultural and service industries, Wu said. As such, the Foreign Investment Law is conducive to boosting the real economy and improving the quality of development.

Lu said that the purpose of enacting and implementing the Foreign Investment Law is to achieve a high level of investment liberalization and facilitation by having consistent and equal management of domestic and foreign investment, allowing China’s model for foreign investment management and its level of openness to be integrated with those in countries with greater openness. Based on this, the law will aid further opening up, promote foreign investment, protect the legitimate rights and interests of foreign investors, and regulate management of foreign investment.

(Edited by Jiang Hong)