China to Further Improve Environment for Foreign Investment

The draft regulation on implementing China's foreign investment law was approved at the State Council's executive meeting chaired by Premier Li Keqiang on Thursday.

The new regulation specifies measures to facilitate and protect foreign investment, better address foreign investors' concerns and promote opening up at a higher level.

Li stressed that the main legal framework provided by the foreign investment law needs to be fleshed out, with detailed operable rules, to ensure implementation along with the law.

"The approval of the implementing regulation demonstrates our resolve to attract foreign investment and further open up," Li said.

The regulation specifies and clarifies matters in the form of administrative regulation, and will be implemented along with the foreign investment law starting on January 1, 2020.

The regulation requires equal treatment of domestic and foreign businesses regarding government funding, land supply, as well as tax and fee cuts.

Foreign companies are entitled to equal participation in the formulation and revision of national, industrial and local standards in accordance with the law. They can make standards-related recommendations and undertake such work as setting standards.

The regulation stipulates that the government and its departments should not stop foreign companies from entering the market for government procurement or place them under discriminatory arrangements.

The regulation pledges to strengthen foreign investment protection, and clearly stipulates that foreign investment will not be requisitioned by the state. In special cases where requisition is necessary for public interest, legal procedures and provisions should be followed, and compensation should be made based on market value.

Forced technology transfer requirements, either through administrative license or penalty, or in disguised forms, on foreign investors and foreign companies are prohibited.

Local governments and their departments must not violate or renege on policy commitments or agreed contracts made in accordance with the law, under the excuse of adjustment in administrative district, government transition, or change in persons in charge.

Governments above county level and their departments should create and improve the mechanism for foreign investors to voice their complaints in a transparent, efficient and convenient manner.

When reviewing applications for market-access license in certain industries, government departments are not allowed to set discriminatory requirements targeting foreign investors in terms of licensing conditions, application materials, review procedures and time limits.

The regulation also provides legal responsibilities of violations regarding equal treatment of foreign businesses, restrictions on equal participation of foreign businesses in standard setting, failure to deliver on policy commitments and forced technology transfers.

According to the regulation, investors from Hong Kong and Macao should refer to the foreign investment law and the implementing regulation when investing in the mainland.

For investment in the mainland made by investors from Taiwan, the law on the protection of investment by Taiwan compatriots and its implementing regulation should be applied, and matters not covered should be addressed by reference to the foreign investment law and the implementing regulation.

The meeting urged implementation of the foreign investment law and the implementing regulation as part of the effort to ensure equal treatment and create a level playing field for domestic and foreign businesses, including those from Hong Kong, Macao and Taiwan.

"The regulation on implementing the foreign investment law aims to further strengthen the market-oriented business environment governed by a sound legal framework, and to reassure foreign investors and businesses regarding fair competition," Li said.

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