The enactment of China’s new foreign investment law is progressing well, as the draft has been submitted for further discussion by the central government, the Ministry of Commerce announced on Nov 2.
The move illustrated the country’s desire to accelerate the modernization of its market access system, as well as strengthen the use of fair and transparent market principles.
Gao Feng, spokesman for the ministry, said the law is expected to serve as a basic guideline for the reform of regulations on foreign direct investment.
“The government will protect the legitimate rights of foreign investors and foster a stable, transparent and law-based business environment,” Gao said at a regular news conference in Beijing.
The ministry will collaborate with the Legislative Affairs Office of the State Council to speed up the lawmaking pace in the next stage, he added.
For the past several years, China has been ramping up efforts to expand investment access and unify laws and regulations while applying stable, transparent and predictable policies to foreign investment.
The government has already introduced a negative-list approach in 11 pilot free trade zones to simplify the process for foreign investors in setting up their business presence in China.
The negative list specifies investment sectors that are off-limits to foreign investors and opens industries not on the list, providing equal treating to overseas and Chinese companies.
Gao said the ministry will replicate nationwide the negative-list approach used in its free trade zones.
The negative list covers 15 sectors such as mining, leasing and financing. Among the sectors, 40 categories and 95 special management measures are included.
Wei Jianguo, vice-president of the China Center for International Economic Exchanges, said the move provides a consistent national treatment for market entrance and reflects a major step forward in liberalizing the Chinese market for overseas investors.
Researchers at accounting firm PricewaterhouseCoopers said in a report that the adoption of a negative list in the market access system apparently makes it easy for companies to invest in businesses that are neither prohibited nor have limited access.
“The approach also strengthens post-investment supervision and enables sharing and publication of information ... Not only those businesses in FTZs will be affected, companies from outside of FTZs will sooner or later be affected,” said the report.
In the first nine months, China’s FDI inflows grew by 1.6 percent year-on-year, compared with a 0.2 percent drop between January and August, according to the Ministry of Commerce.
Zhang Jianping, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, said while there were concerns about withdrawal of foreign investment in the past, the FDI structure has improved.
“The FDI inflow is still growing, which can offset the outflows.”