Can the new foreign investment law level the playing field in China?

17 March, 2019, 15:35 | Author: Wade Massey
  • China-US trade war: New Chinese law seeks to address concerns

Under the bill, foreign investors would enjoy the same privileges as Chinese companies in most sectors, except those placed on "negative lists", officials said. As reported by CNBC, the committee endorsed a law that addresses concerns of foreign companies doing business in China.

Moreover, the China (Shanghai) Pilot Free Trade Zone, established in 2013, together with another 11 FTZs, has been actively exploring new approaches to managing foreign investment.

Fast-tracked for approval at this month's annual session of parliament, the law comes into effect on January 1, 2020.

Washington and Beijing have been locked in a tit-for-tat tariff battle as USA presses China for an end to practices and policies it argues have given Chinese firms unfair advantages, including subsidising of industry, limits on access for foreign companies and alleged theft of intellectual property.

According to the FIL, Chinese officials are prohibited from revealing commercially confidential information they obtain from foreign businesses or from favouring Chinese firms.

The annual session of China's parliament this year ended Friday with stronger information control and a consideration toward the United States, which has been putting pressure on Beijing to rectify its alleged unfair trade practices. "We will closely monitor the FIL's implementation to ensure that it is fully respected at all levels of government and in all corners of this country", said Mats Harborn, president of the EU Chamber of Commerce in China.

China ready to use more policy tools to boost economy
Tax breaks may be provided to these service providers in terms of expenses on water, electricity and natural gas", he said. Li said that China will honor its commitments to continue pushing ahead with opening up and reform.


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The changes would "ensure violators have no place to hide", he said. 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)". 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 USA dollars of foreign capital utilized.

China has so far promised billions of dollars in planned tax cuts and infrastructure spending, as economic momentum is expected to cool further due to softer domestic demand and a trade war with the United States.

"Not allowing the economy to slip out of a reasonable range, that is to say we will not allow waves of layoffs", said Li, adding the government will provide support to firms creating the most jobs.

The American Chamber of Commerce in China, which represents about 900 U.S. companies, said this week that the law was being pushed through without "extensive consultation and input" from foreign businesses in the country. In the age of further reform and opening up, the "three foreign capital laws" formulated in the early days can no longer meet the needs of developing a new economic system with an open market.

"While not all of our concerns were addressed in this law, it is time to move forward", he added. They said they will need to see how it is enforced to know whether it will improve conditions for foreign companies. The law actively promotes foreign investment, protects the legitimate rights and interests of foreign investors, creates a law-based, global and friendly business environment, and provides a legal bulwark for the new round of high-level opening-up.

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