Published: Sun, March 17, 2019
Worldwide | By Isabel Fisher

China's top legislature adopts new Foreign Investment Law

China's top legislature adopts new Foreign Investment Law

The newly signed Foreign Investment Law will only help to accelerate this process as global investors and companies develop their Chinese deal-making experience'.

"The adoption of the foreign investment law is an innovation in the legal system on foreign investment and is to replace the existing three laws and serve as the basic law on foreign investment as China continues to open up in the new era", Zhang Yesui, the spokesman of the NPC said ahead of the session.

China's new Foreign Investment Law (FIL) has been adopted by the country's top legislature during the closing meeting of its annual session today with the new law coming into effect from 1 Jan 2020.

Some law experts and business consultants have expressed scepticism about how effective the law will be in protecting foreign firms from compelled technology transfers, given a lack of rule of law in China.

Both Beijing and Washington are still working towards a trade agreement after a year in which they were locked in a tit-for-tat exchange of punitive tariffs.

Premier Li Keqiang's comment at a news conference was the government's highest-level rejection of accusations Chinese companies might spy on foreign customers.

China says the law will improve the openness, transparency and predictability of the investment environment, establish equal treatment for foreign and domestic investors, and bar forced technology transfers - a focal point of trade tensions with the U.S.

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

Foreign companies in China also often complain that state-owned Chinese firms benefit from unfair advantages, such as government subsidies and preferential treatment. Apple (AAPL) and NVIDIA (NVDA) have warned that China's slowdown is hurting their earnings, and Advanced Micro Devices (AMD), Micron (MU), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOG) have also been impacted by the world's two largest economies' trade issues.

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.

"Of course, we are faced with many uncertain factors this year".

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".

The support measures rolled out so far are taking time to kick in and most analysts believe activity may not convincingly stabilise until the middle of the year. The law will become effective on January 1, 2020.

The premier announced on March 5 that the Value-Added Tax for the manufacturing sector would be cut to 13 per cent from 16 per cent. Value-Added Tax for the transport and construction sectors will be reduced to 9 per cent from 10 per cent.

Data on Thursday showed that China's survey-based jobless rate rose to 5.3 per cent in February, from 4.9 per cent in December, partly due to job shedding by export-oriented companies.

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