China's Legislature Passes Landmark Foreign Investment Law

China foreign investment law: Bill aims to ease global concerns

The annual session of China's parliament this year ended Friday with stronger information control and a consideration toward the United States, which has been putting pressure on Beijing to rectify its alleged unfair trade practices.

The law, to replace existing regulations for joint ventures and wholly foreign-owned enterprises, is created to ease concerns among foreign companies about the difficulties they face operating in the world's second-largest economy. 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.

A draft was presented to the parliament last week but the latest revisions have not been made public since then.

Linklaters analysis projects US$1.5 trillion of inbound investment into China over next ten years catalysed by new Foreign Investment Law.

Washington and Beijing have been locked in a tit-for-tat tariff battle as USA officials press China for an end to practices and policies it argues have given Chinese firms unfair advantages. For example, they have adopted a "pre-establishment national treatment (PENT) with a negative list" approach to foreign investment, unified domestic and foreign capital laws and regulations, reformed the foreign investment approval system, and eased market access.

However, Parker added that "while the language on criminal liability is positive, it will be hard to enforce".

Under the bill, foreign investors would enjoy the same privileges as Chinese companies in most sectors, except those placed on "negative lists", officials said.

China foreign investment law: Bill aims to ease global concerns
Could China's Foreign Investment Law Appease Trump?

China can use reserve requirements and interest rates to support economic growth, Premier Li Keqiang said, promising broad policy steps to prevent a sharper deceleration as the world's second-biggest economy expands at the slowest pace in almost three decades.

Li's comments suggest Beijing is ready to roll out more stimulus measures to ensure the economy grows within a targeted range of 6 to 6.5 per cent.

The speed at which this process was concluded is clearly a response to Beijing's ongoing trade dispute with Washington, Katja Drinhausen, a researcher at the Berlin-based Mercator Institute for China Studies, told DW.

In October 2017, the Communist Party held its twice-a-decade congress, where it amended its constitution to enshrine Xi's political "thought" with his name in order to make his status comparable to Mao Zedong, founder of the People's Republic of China.

"I believe that the last major blocking was in autumn 2017", an engineer of Express VPN, one of the most popular VPN providers, told Kyodo News.

"Moreover, we can deploy quantity-based or price-based policy tools such as reserve requirements and interest rates".

The central bank has cut banks' reserve requirement ratios (RRR) five times since past year, with a two-stage RRR cut in January releasing a total of 1.5 trillion yuan ($223.23 billion) into the financial system. "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".

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