In March 2019, China’s national legislator passed the foreign investment law, the landmark legislation for foreign investment, which came into effect on January 1st, 2020..  According to the law, China will create a stable, transparent, predictable and fair market environment. Determined to safeguard free trade and integrate itself into economic globalization, China will continue its win-win cooperation with investors around the world.

The Law’s key provisions are as follows:

  • It defines “foreign investment” as the investment activity directly or indirectly conducted by a foreign natural person, enterprise or other organization, including establishing a foreign-funded enterprise in China; acquiring shares, equities, property shares or any other similar rights and interests of a local enterprise; making investment to initiate a new project independently or jointly with any other investor; and making investment in any other way stipulated by laws or regulations.
  • The government implements the management systems of pre-establishment national treatment and negative list for foreign investment.
  • The competent departments for commerce (Ministry of Commerce) and for investment (National Development and Reform Commission) are delegated major responsibility to promote, protect and manage foreign investment.
  • All national policies on supporting the development of enterprises shall equally apply to foreign-funded enterprises in accordance with the law. The government establishes a service system for foreign investment, and provide foreign investors and foreign-funded enterprises with consultation and services in respect of laws and regulations, policies and measures, investment project information and other aspects.
  • The government is not to expropriate any investment made by foreign investors; Under special circumstances, the government may expropriate or requisition an investment made by foreign investors for public interests in accordance with the law. Such expropriation or requisition shall be made pursuant to statutory procedures and fair and reasonable compensation will be given in a timely manner.
  • A foreign investor may freely transfer inward and outward its contributions, profits, capital gains, income from asset disposal, royalties of intellectual property rights, lawfully obtained compensation or indemnity, income from liquidation and so on within the territory of China in CNY or a foreign currency.
  • The government protects the intellectual property rights and trade secrets of foreign investors and foreign-funded enterprises, and encourages technology cooperation on the basis of free will and business rules.
  • The government establishes a safety review system for any foreign investment affecting or having the possibility to affect national security.