As a hot topic of the two sessions in Beijing, the Foreign Investment Law is a new cornerstone in the field of foreign investment in China which will help create a law-based, internationalized and business-friendly environment and provide a legal guarantee for more opening up.

“The enactment of the Foreign Investment Law highlights the main keynote of further opening up and promoting foreign investment,” said Shen Chunyao, a deputy to the National People's Congress. The new law aims to create an even playing field for domestic and foreign capital in order to build a world-class business environment.

Yang Chengzhang, member of the national committee of Chinese People's Political Consultative Conference (CPPCC) and chief economist of Shenwan Hongyuan Securities Research Institute, said that the enactment of the Foreign Investment Law embodies China’s opening-up strategy and is good for the long-term stable development of foreign investment in China.

“In the past, although foreign investors have enjoyed tax preferences, there are still many restrictions on foreign investment in China, such as the strict supervision of staff, logistics and capital,” said Shen. He also noted that it is not enough to attract foreign investors solely through tax preferences and slightly cheaper land. The biggest concern among foreign investors is whether their business can develop in China over the long term.  

Jiang Ying, member of the national committee of CPPCC and vice chairman of Deloitte China, said that tax subsidies are not an effective long-term strategy for attracting foreign investment. To foreign enterprises, stability and predictability are more important. China's institutional environment is very competitive in the global market.

The law addresses some of the current problems facing foreign investment. For example, it emphasizes the openness and transparency of foreign investment policies and the equal status of foreign-invested enterprises in competition as well as the commitment of local governments.

The members and deputies believe that the implementation of the Foreign Investment Law will build a more stable, transparent and fair business environment, which is a strong legal guarantee for China to achieve a high level of opening up and make active and effective use of foreign capital.

The draft law stipulates that the State maintains a system of pre-entry national treatment plus a negative list management for foreign investment.

The pre-entry national treatment stipulates that the treatment given to foreign investors and their investment at the stage of investment admission should be commensurate to that of domestic investors and their investments; the negative list refers to the special management measures that are being adopted for the admission of foreign investment in specific areas. The State gives national treatment to foreign investment outside the negative list.

“It is a brand-new system and the key clause of the Foreign Investment Law,” Shen said. He also noted that it fully embodies the principle of legislation.

Hang Yingwei, deputy to the National People's Congress and deputy secretary general of Shanghai municipal government, noted that the reform is piloted in Shanghai. Shanghai Pilot Free Trade Zone has been exploring the system of pre-entry national treatment since its establishment. Its first released negative list had 190 special management measures, but it had been simplified to 45 measures by 2018.

According to the draft law, the State shall establish a complaint mechanism for foreign-invested enterprises, coordinate and improve major policies and measures in dealing with complaints from foreign-invested enterprises, and deal with problems in a timely manner.

The income from capital contribution, profits, capital gains, asset disposal, royalties on intellectual property rights, compensation or compensation obtained according to law and liquidation of foreign investors in China may be freely remitted in or out of China in Renminbi or foreign exchange currency, according to law.

“We should coordinate the expansion of opening up and risk prevention,” some deputies suggested that while promoting the negative list management system, foreign investment security review should also be established to effectively safeguard national security.

They also suggested that when the Foreign Investment Law is approved, the management system and relevant regulations and laws regarding foreign investment inside the negative list should be announced as soon as possible, ensuring the full implementation of the law.