New Foreign Investment Law Approved

NEW FOREIGN INVESTMENT LAW APPROVED

China’s new Foreign Investment Law has been approved by the second session of the 13th National People’s Congress which took place on March 15, 2019. It will go into effect on Jan 1, 2020.

The new legislation is expected to replace three existing laws on foreign direct investment in China that deal with Sino-Foreign equity Joint Ventures, Wholly Foreign-Owned Enterprises and Sino-Foreign Contractual Joint Ventures, since these are considered no longer able to meet the needs of reform and opening up in the new era.

According to the law, foreign investors seeking to set up a business in China will be given national treatment prior to being admitted and will be subject to the foreign investment negative list, which prohibits investment in certain sectors.

The legislation also aims to give protection to the intellectual property rights of foreign-invested enterprises, including a revision of a separate law covering intellectual property protection and the introduction of a mechanism for punitive compensation in cases of intellectual property infringement. It prohibits forced technology transfer and illegal government meddling in foreign business practices.

However, details of operations are still required to be reported to Chinese officials, without legal guarantees that this data will not be passed on to Chinese competitors. Moreover, the law is a set of intentions rather than a specific, enforceable set of rules.


 

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