According to Beijing media reports, China’s legislature is considering a new law governing foreign investment that will streamline existing rules and prevent the forced transfer of technology. The new “unified law” will replace three current laws on Chinese and foreign equity joint ventures, non-equity joint ventures and wholly foreign-owned enterprises.
A draft of the proposed legislation was presented at a meeting of the Standing Committee of the National People’s Congress (NPC), which began on Dec. 23. When the new law become effective, it will prevent local governments from restricting market access for foreign firms and from forcing them to transfer technology.
This will ensure foreign investors would enjoy the same privileges as Chinese companies in most sectors except those excluded on a “negative list.” U.S. and EU officials have long complained of a lack of fair access for foreign companies in China, as well as rampant theft of intellectual property.
The Chinese government Standing Committee said in a statement about the meeting posted on the NPC website that: “In order to further expand opening up, actively promote foreign investment, protect the legitimate rights and interests of foreign investment, and promote the formation of a new pattern of comprehensive opening, the State Council has proposed a bill.”
Experts believe that the move signals China’s support for the economy as the trade war with the U.S. has stymied growth. Top policymakers had pledged last week that they would support tax cuts and other policy measures that further opening the economy and provide better protection of intellectual property rights.
The government also demonstrated its willingness to open up its markets with the publication of its first unified “negative list” of the business sectors that are off limits to foreign, and in some cases domestic investors. The new list comprises 151 areas that are either off limits to non-state businesses or that require them to go through an application and approval process.
China’s top economic planning agency, the National Development and Reform Commission (NDRC), which compiled the document in cooperation with the Ministry of Commerce, said it applied across the mainland and overrode all related local government regulations.
Xu Shan Chang, director of the NDRC’s economics system reform department. “The promulgation of the negative list nationwide means that China has set up a unified, fair and rule-based system for market access,” “From now on, other government agencies and local governments are barred from making rules about market entry.”