On the 15th of March 2019, the 13th National People’s Congress passed China’s Foreign Investment Law (FIL) which will enter into force on the 1st of January 2020. The new FIL is seen as good news for foreign direct investments (FDIs), because it creates greater openness, more transparency and predictability for foreign investors.
China’s foreign investment law has long been criticized for being unpredictable and not transparent. Aiming at improving the openness, transparency and predictability, the new FIL is believed to become the most important legal milestone in China’s continuing process of opening up to the outside world following China’s entry into the WTO in 2001. Among others, the key messages in the FIL include:
- Government officials are prohibited from using administrative means to force foreign businesses to transfer their technology.
- Foreign investors enjoy equal treatment and market access with domestic counterparts in China, except those expressly prohibited.
- China reserves the right to retaliate against countries that discriminate against Chinese investment with “corresponding measures”.
- A system dealing with complaints and appeals from foreign investors is established.
The new FIL provides for comprehensive protection over foreign investments. For example according to Article 23, governmental authorities and officials bear the confidentiality obligation towards trade secrets of foreign investors and is obliged not to disclose any confidential information to any unrelated third party without the foreign investor’s consent. In essence, the new FIL indicates the government’s willingness to further open up its markets to foreign investments and address complaints that have been prevalent among foreign investors.
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