China approves foreign investment law, possible USA olive branch

Lester Mason
March 17, 2019

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.

According to Inkstone News, the expedited process of approving the foreign investment law is part of China's efforts in sending a friendly message to worldwide businesses that previously raised concerns about the Asian country's standards for foreign investors.

They endorsed a foreign investment law in the Chinese parliament aimed at appeasing the concerns of trading partners in Washington and elsewhere.

China's parliament, the National People's Congress (NPC), concluded its 10-day annual session on Friday by adopting the law.

The passage came as USA and Chinese negotiators hold complex talks aimed at resolving a months-long trade war that has pounded businesses with tariffs on US$360 billion in two-way commerce.

US President Donald Trump is expecting in the coming weeks with news on the dispute with China.

China's top trade negotiator, Liu He, held phone talks with US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer, with the official Xinhua news agency saying they made "substantial progress". Under the new foreign investment law, no local government can provide confidential information to Chinese firms.

Beijing says the act offers foreigners equal treatment, greater market access and better legal protection.

The changes will ensure that foreign investors will enjoy the same privileges as Chinese companies in most sectors, except those placed on a "negative list".

"The newly signed Foreign Investment Law in China dramatically increases scope for foreign investors" Chinese M&A and investment strategies.

"We are concerned, however, that such an important and potentially far-reaching piece of legislation will be enacted without extensive consultation and input from industry stakeholders", it said.

Despite the promised changes, businesses will still need to "jump... several hurdles" to gain market access, said Kyle Freeman, a lawyer at Dezan Shira & Associates.

China's number two leader yesterday denied Beijing tells its companies to spy overseas, refuting United States warnings that Chinese technology suppliers might be a security risk. "It is a full testament to China's determination and confidence in opening wider to the outside world and promoting foreign investment in the new era".

Parts of it aren't specific enough on issues such as intellectual property protection, despite a number of revisions to the first draft, according to Jacob Parker, vice president of the US-China Business Council.

"I think we can safely assume that this language is a result of the trade negotiations as it was slipped in at the last minute". For example, the new law stipulates that foreign-invested enterprises shall participate in government procurement activities on a level playing field, and government procurement shall treat the products of foreign-invested enterprises produced in China equally.

China claims it's about to create a level playing field for worldwide companies, but many of them are still wary of expanding their presence in the world's second largest economy.

Other reports by Iphone Fresh

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