The draft of the foreign investment law is to be presented to the country’s top legislature for approval on March 15, and no one should underestimate its importance.
The three existing laws related to foreign investment — the law on Chinese-foreign equity joint ventures, on Chinese-foreign contractual joint ventures and on wholly foreign-owned enterprises — have played their roles in promoting China’s opening-up in the past four decades. It would have been unimaginable for China to receive the most foreign direct investment for 26 consecutive years since 1992 among developing countries without these three laws.
However, with the size of the Chinese economy rising to be the world’s second-largest, the rise in its labor costs, the country’s much higher environmental requirements and the urgent need for higher quality economic growth and upgraded high-tech industries, opening the door wider to foreign investment has become a necessity.
The pre-entry national treatment plus negative list as stipulated in Article 4 of the draft law suggests that almost all restrictions on foreign investment in the previous three laws will be scrapped except for those on the negative list.
And Article 9 of the draft stipulates that government policies supporting the development of enterprises apply to all foreign-invested companies, which are also eligible to compete for government procurement contracts.
No wonder that promotion of foreign investment has been interpreted as the gist of the law.
To be exact, the law is meant to create a fair and even competition environment for foreign companies to compete with their Chinese counterparts.
The draft also has detailed stipulations about the protection of intellectual property, protection of the legal rights and interests of foreign companies and prohibition of forced technology transfer.
