China's new law to improve business environment for foreign and domestic investors

The closing meeting of the second session of the 13th National Committee of the Chinese People's Political Consultative Conference (CPPCC) is held at the Great Hall of the People in Beijing, capital of China, March 13, 2019. [Photo: Xinhua]

China's political advisors have said that the draft foreign investment law submitted to lawmakers during the annual meeting of the national legislator shows that the government is keen to embrace global investors.

A draft foreign investment law is currently being deliberated by the nation's lawmakers.

If it's adopted, it will replace three existing laws on foreign equity joint ventures, wholly foreign-owned enterprises, and cross-border contractual joint ventures.

Jiang Ying is a political advisor with the Chinese People's Political Consultative Committee, the CPPCC. She is also a senior executive from Deloitte.

She said the law will help to boost the confidence of foreign investors in China's market.

"The new law aims to improve transparency, fairness, and predictability in the market environment. There should be a stable system that serves foreign investors. A mechanism should be established to properly handle their complaints. The draft law fully reflects the government's endeavors to streamline administration, reduce barriers in the market, and improve both supervision and services. It also shows that the government's capacity for management has improved."

The draft law offers pre-establishment national treatment to foreign companies. This means that foreign investors are entitled to equal treatment in industry sectors areas outside of the negative list, which specifies sensitive sectors of the economy off limit to foreign investors.

Some commentators have expressed concerns that the new law will negatively impact China's domestic private sector firms.

But Liu Wei, who is a political advisor and the CEO of PCI Technology, said that private companies will be able to deal with the extra competition they'll face as the country opens wider to the world, and that many of these domestic firms will benefit from the new law.

"In the field of technology, companies in China are quite competitive when it comes to research and development. Domestic companies are more familiar with the local market. I have a positive view of the new law. It think it fixed the previous 'super-national' treatment that was given to overseas investors. More importantly, it offers better assistance for domestic companies taking part in global competition."

Liu Shijin is the deputy director of the economics committee of the CPPCC.

He said that the law aims to improve the transparency of foreign investment policies, and ensure that domestic and foreign enterprises can compete on a level playing field.

"Once it's approved, the new law will play a positive role in stabilizing the expectations of foreign investors regarding China's market, and help them to secure their long-term development in China. All of the companies in a market economy should be treated equally, no matter who owns them. This is the big goal in the future."

China has made a series of moves over the past year to reach out to overseas investors and ensure fair competition between domestic and foreign players.

Official data showed that last year, despite a global economic downturn, China saw a record level of foreign direct investment, with an inflow of capital worth 135 billion U.S. dollars.