New law gives foreign investors teeth in bite of China market

.In a world fraught with uncertainties, foreign firms in China have something certain to expect for 2020 and beyond: a more law-based business environment.

As a comprehensive and fundamental set of legal standards for foreign investment activities, the foreign investment law, passed by the country's top legislature in early 2019, took effect on Jan. 1, 2020 to better protect foreign investors' interests.

With unified provisions for the entry, promotion, protection and management of foreign investment, it is a new and fundamental law in this field that will address foreign firms' concerns and enhance their "sense of gain," said Zong Changqing, head of the foreign investment administration department of the Ministry of Commerce.

Facilitation and ease

Previously, foreign investment in China was mainly regulated by three separate laws on Chinese-foreign equity joint ventures, wholly foreign-owned enterprises and Chinese-foreign contractual joint ventures. They had provided strong legal safeguards for foreign enterprises but were outgrown by the needs of reform and opening up in the new era.

There are fewer "regulations" and "limitations" under the new foreign investment law, said Wei Jianguo, vice chairman of the China Center for International Economic Exchanges. "The law could boil down to two words: 'facilitation' and 'ease.'"

With the law, foreign-invested enterprises will be granted access to government procurement markets through fair competition. The law also bans using administrative licensing and penalties to force foreign investors and firms to transfer technology.

Foreign companies are entitled to equal participation as their domestically-invested peers 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.

Wei said foreign investors could rest assured about the earnest law implementation by local governments and the consistency of China's policy stance as the country's top leadership have voiced commitment to opening doors wider.

China has also unveiled a matching regulation with detailed measures to help enforce the foreign investment law. At the same time, local governments like foreign investment hubs Guangdong and Shanghai are exploring supportive laws and regulations.

People visit the booth of GE at the Equipment exhibition area during the second China International Import Expo (CIIE) in Shanghai, east China, Nov. 8, 2019. [Photo/Xinhua]

Confidence boosted

As the foreign investment law is in effect, China might see a surging inflow of foreign investment with various sizes of projects in 2020, Wei estimated, as big investments would bring along many small and medium-sized ones.

The new law is hailed as a boost to foreign firms' confidence in expanding investment in the world's largest developing economy.

The law offers Qualcomm a more predictable outlook and a more solid foundation for industrial cooperation in China, said Zhao Bin, the U.S. tech firm's senior vice president.

Qualcomm expects an increased cross-industry collaboration and partnerships in China as 5G applications expand beyond the smartphone sector, and will continue accelerating the development of the 5G and AI ecosystems through venture investment in promising startups in China, according to Frank Meng, chairman of Qualcomm China.

Wern-Yuen Tan, president and CEO of Walmart China, said China has a very "interesting" retail market, where consumers are willing to try new shopping and digital experiences. "China offers good learning opportunities to market players."

The retail giant plans to expand logistics investment, open new stores and depots, and upgrade existing stores in China to continuously provide consumers with differentiated products and create "online-merge-offline" experiences in line with Chinese shoppers' evolving preferences.

"We have full confidence in China and will continue to expand investment here," Tan said.