China adopts foreign investment law — China Focus

China adopts foreign investment law — China Focus

The global business community in China and analysts see this law as China's attempt to push through a trade deal with the United States.

The National People's Congress voted 2,929 in favour of the law -with eight against and eight abstentions - barely three months after a first draft was debated, an unusually quick turnaround for the legislature, which meets once a year. China's growing economy has become a huge market for top USA companies like General Motors, Boeing and Apple.

The world's two largest economies are locked in a trade war since Trump imposed heavy tariffs on imported steel and aluminium items from China in March a year ago. The tit-for-tat tariffs and rising protectionist tendencies have hurt business sentiment worldwide and stoked uncertainty.

It will ban forced technology transfer and illegal government "interference" in foreign business practices, according to the latest draft.

During the session, Chinese legislator also adopted Premier Li Keqiang's government work report. Chinese Premier Li Keqiang said during a media briefing that Beijing will soon release documents and regulations that explain the benefit of the law for both Chinese firms and foreign investors.

But Western observers remain skeptical.

With unified provisions for the entry, promotion, protection, and management of foreign investment, it is a new and fundamental law for foreign investment in China.

Shares on Chinese stock exchanges climbed after the government reaffirmed its commitment to boosting growth.

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"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.

"[The changes] do not address a number of the persistent concerns of foreign companies or foreign-invested enterprises in China", it said in its statement. The chamber noted that the clause gives China power to take "unilateral action against trading and investment partners based on a principle of perceived negative reciprocity".

He added, "The addition of language imposing criminal penalties for sharing sensitive foreign company information adopts a much tougher deterrent against counterfeiting and theft and will offer new avenues for the enforcement of protection".

"It's a very important piece of legislation that people have been waiting for for a long time because it will change the working environment for foreign investors in China - and it will most likely have an impact on the way in which Chinese investors can work overseas", Hendrischke said.

The new law will take effect on 1 January 2020.

"What the security audit for foreign investment will look like and what this means in practice for foreign companies is not yet clear", said MERICS expert Drinhausen. It comes as the country is expanding its military presence in the region. "There's a lot of stuff that China can do" to protect domestic firms, he argued. Moreover, Donald Trump has said that he's in "no rush" to do a trade deal but that "it's got to be a good deal for us and if it's not, we're not going to make that deal".

The new law clearly bodes well for foreign investors, especially in terms of market access and equal treatment, said Mario Ohoven, president of the German Association for Small and Medium-sized Businesses.

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