On China’s Foreign Investment Law and China-US Two-Way Investment
By Zhang Xiaoqiang |
chinawatch.cn |
Updated: 2019-09-30 11:44
China’s new Foreign Investment Law was deliberated and approved at the Second Session of the 13th National People’s Congress on March 15, 2019, which will take effect on January 1, 2020. At present, the National Development and Reform Commission, the Ministry of Commerce and other departments are moving faster to formulate relevant rules to ensure effective implementation of the law.
After the adoption of the law, the China International Economic Exchange Center held a symposium with representatives from foreign companies in China, including American Chamber of Commerce in China, the European Union Chamber of Commerce in China, Japan and Republic of Korea.
According to the participants, the law carries great significance for providing legal guarantee for the policy of high-level liberalization and facilitation of investment and the pre-establishment national treatment plus a negative list to ensure that foreign-invested enterprises can participate in standard setting and government procurement with equal rights through fair competitions. China will also protect the intellectual property rights of foreign investors and foreign-invested enterprises, strengthen punishment for intellectual property infringements and encourage technological cooperation based on voluntary transfer and business rules. Administrative institutions and the staff are not allowed to force technology transfer through administrative means.
The law has addressed concerns of foreign enterprises in China such as formulation of participation standards, government procurement and compulsory technology transfer. Its adoption fully demonstrates China’s encouragement of foreign investment and efforts of developing high-level business environment to provide Chinese and foreign enterprises with more room of growth and allow them to share the fruits of China’s development through cooperation and fair competitions in the huge Chinese market.
On April 10, 2018, President Xi Jinping highlighted in the keynote speech of the opening ceremony of the Boao Forum for Asia that China will open up wider to the world and introduced four major measures for the goal: China will greatly ease market access, lift restrictions on the proportion of foreign investment in domestic financial industry and reduce restrictions on foreign investment in industries such as automobiles. The country will also create a more attractive investment environment, complete the revision of the negative list for foreign investment, improve intellectual property protection and expand imports.
In the past year, China has made significant and substantial progress in the aspects above. The construction of US-based Tesla’s wholly-owned new energy automobile factory in Shanghai started. The agreement of improving the investment proportion of German BMW in the Sino-German joint adventure located in Shenyang to 75 percent was also reached. In July last year, the new pre-establishment national treatment plus a negative list was issued. Financial institutions from the United Kingdom, Germany, the United States and other countries have been approved to improve the proportion their investment in China. The first China International Import Expo saw fruitful achievements in which the number of US companies reached 180, ranking third in nearly 1,200 exhibitors. In 2018, China’s actual utilization of foreign capital increased by 3 percent while global foreign direct investment decreased greatly by nearly 20 percent, reaching $135 billion.
On April 26 this year, President Xi delivered a keynote speech at the opening ceremony of the second Belt and Road Forum for International Cooperation and pointed out that China will adopt a string of measures of reform and opening up to strengthen institutional and structural arrangements to promote higher-level opening up, continuing to cut items on the negative list, increase imports of goods and services and focus more on the implementation of opening up.
China will regulate governments at all levels in terms of administrative approval and market supervision, eliminate inappropriate regulations, subsidies and practices that impede fair competitions in the market, treat all enterprises and entrepreneurs fairly and improve marketization, rule of law and facilitation of domestic business environment.
Against such a background, the 2019 China Business Climate Survey Report released by the American Chamber of Commerce in China in February this year shows that more than 80 percent of its members expect that the industry will see positive growth in 2019, indicating that China is still a key destination of recent global investment.
53 percent of the companies believe that China’s investment market will be more open in the future and peak since the issue was first proposed in 2016. However, the report also pointed out that the tension between China and the US is becoming a new concern. According to the companies, both the Chinese and US governments are supposed to take measures to avoid growing tensions in bilateral relations.
China and the US have become the largest trading partners and important investment destinations of each other. Since interests in China-US bilateral economic and trade cooperation have constantly improved, relations of the two countries are based on mutual benefits and win-win development. In economic and trade negotiations, the US announced to improve the tariff imposed on China’s exports to it greatly to 25 percent, which has not only damaged the its national credibility but hindered China-US economic and trade talks.
From the perspective of two-way investment, US investment in China has seen slow growth in recent years, while China’s investment in the US has also reduced greatly. Data from the Rhodium Group shows that the investment of Chinese enterprises in the US was about $45 billion, $30 billion and $5 billion from 2016 to 2018 respectively. Foreign investment of Chinese enterprises in 2018 was about $130 billion, up 4.2 percent compared with the previous year.
The main reason of the decline lies in protectionism and discrimination adopted by the US government against Chinese enterprises. Since equality and mutual benefits are fundamental principles of economic, trade and investment cooperation, China’s Foreign Investment Law stipulates that it can take corresponding measures against any country or region that adopts measures such as discriminatory prohibitions and restrictions on investment in China. In terms of widening opening up and encouraging enterprises to compete fairly, the US government needs to take effective measures to resolve China’s concerns.
According to the important consensus reached by President Xi Jinping and President Trump in Argentina last December, the two sides will expand cooperation, shelve differences and focus on mutual benefits and respect to jointly promote Sino-US cooperation, which can lay solid and stable foundation for sustainable and sound development of Sino-US two-way investment.
The author is executive Vice Chairman of China Center for International Economic Exchanges.
The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
China’s new Foreign Investment Law was deliberated and approved at the Second Session of the 13th National People’s Congress on March 15, 2019, which will take effect on January 1, 2020. At present, the National Development and Reform Commission, the Ministry of Commerce and other departments are moving faster to formulate relevant rules to ensure effective implementation of the law.
After the adoption of the law, the China International Economic Exchange Center held a symposium with representatives from foreign companies in China, including American Chamber of Commerce in China, the European Union Chamber of Commerce in China, Japan and Republic of Korea.
According to the participants, the law carries great significance for providing legal guarantee for the policy of high-level liberalization and facilitation of investment and the pre-establishment national treatment plus a negative list to ensure that foreign-invested enterprises can participate in standard setting and government procurement with equal rights through fair competitions. China will also protect the intellectual property rights of foreign investors and foreign-invested enterprises, strengthen punishment for intellectual property infringements and encourage technological cooperation based on voluntary transfer and business rules. Administrative institutions and the staff are not allowed to force technology transfer through administrative means.
The law has addressed concerns of foreign enterprises in China such as formulation of participation standards, government procurement and compulsory technology transfer. Its adoption fully demonstrates China’s encouragement of foreign investment and efforts of developing high-level business environment to provide Chinese and foreign enterprises with more room of growth and allow them to share the fruits of China’s development through cooperation and fair competitions in the huge Chinese market.
On April 10, 2018, President Xi Jinping highlighted in the keynote speech of the opening ceremony of the Boao Forum for Asia that China will open up wider to the world and introduced four major measures for the goal: China will greatly ease market access, lift restrictions on the proportion of foreign investment in domestic financial industry and reduce restrictions on foreign investment in industries such as automobiles. The country will also create a more attractive investment environment, complete the revision of the negative list for foreign investment, improve intellectual property protection and expand imports.
In the past year, China has made significant and substantial progress in the aspects above. The construction of US-based Tesla’s wholly-owned new energy automobile factory in Shanghai started. The agreement of improving the investment proportion of German BMW in the Sino-German joint adventure located in Shenyang to 75 percent was also reached. In July last year, the new pre-establishment national treatment plus a negative list was issued. Financial institutions from the United Kingdom, Germany, the United States and other countries have been approved to improve the proportion their investment in China. The first China International Import Expo saw fruitful achievements in which the number of US companies reached 180, ranking third in nearly 1,200 exhibitors. In 2018, China’s actual utilization of foreign capital increased by 3 percent while global foreign direct investment decreased greatly by nearly 20 percent, reaching $135 billion.
On April 26 this year, President Xi delivered a keynote speech at the opening ceremony of the second Belt and Road Forum for International Cooperation and pointed out that China will adopt a string of measures of reform and opening up to strengthen institutional and structural arrangements to promote higher-level opening up, continuing to cut items on the negative list, increase imports of goods and services and focus more on the implementation of opening up.
China will regulate governments at all levels in terms of administrative approval and market supervision, eliminate inappropriate regulations, subsidies and practices that impede fair competitions in the market, treat all enterprises and entrepreneurs fairly and improve marketization, rule of law and facilitation of domestic business environment.
Against such a background, the 2019 China Business Climate Survey Report released by the American Chamber of Commerce in China in February this year shows that more than 80 percent of its members expect that the industry will see positive growth in 2019, indicating that China is still a key destination of recent global investment.
53 percent of the companies believe that China’s investment market will be more open in the future and peak since the issue was first proposed in 2016. However, the report also pointed out that the tension between China and the US is becoming a new concern. According to the companies, both the Chinese and US governments are supposed to take measures to avoid growing tensions in bilateral relations.
China and the US have become the largest trading partners and important investment destinations of each other. Since interests in China-US bilateral economic and trade cooperation have constantly improved, relations of the two countries are based on mutual benefits and win-win development. In economic and trade negotiations, the US announced to improve the tariff imposed on China’s exports to it greatly to 25 percent, which has not only damaged the its national credibility but hindered China-US economic and trade talks.
From the perspective of two-way investment, US investment in China has seen slow growth in recent years, while China’s investment in the US has also reduced greatly. Data from the Rhodium Group shows that the investment of Chinese enterprises in the US was about $45 billion, $30 billion and $5 billion from 2016 to 2018 respectively. Foreign investment of Chinese enterprises in 2018 was about $130 billion, up 4.2 percent compared with the previous year.
The main reason of the decline lies in protectionism and discrimination adopted by the US government against Chinese enterprises. Since equality and mutual benefits are fundamental principles of economic, trade and investment cooperation, China’s Foreign Investment Law stipulates that it can take corresponding measures against any country or region that adopts measures such as discriminatory prohibitions and restrictions on investment in China. In terms of widening opening up and encouraging enterprises to compete fairly, the US government needs to take effective measures to resolve China’s concerns.
According to the important consensus reached by President Xi Jinping and President Trump in Argentina last December, the two sides will expand cooperation, shelve differences and focus on mutual benefits and respect to jointly promote Sino-US cooperation, which can lay solid and stable foundation for sustainable and sound development of Sino-US two-way investment.
The author is executive Vice Chairman of China Center for International Economic Exchanges.
The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
