MOFCOM Proposes Full Liberalisation of Foreign Investment Access
21 January 2015
On 19 January 2015, the Ministry of Commerce (MOFCOM) released the Foreign Investment Law of the People’s Republic of China (Opinions Soliciting Draft). This proposes that the existing Sino-Foreign Equity Joint Venture Law, Foreign Capital Enterprise Law, and Sino-Foreign Cooperative Joint Venture Law be amended and combined to form the Foreign Investment Law. Public opinions are now being solicited with regard to this revised legislation.
Under the terms of the draft proposal, the existing requirement to examine and approve each and every instance of foreign investment will be removed. Instead, foreign investment management will be conducted via pre-access national treatment and a negative list will also be adopted. These moves have been designed to considerably reduce the restrictive measures on foreign investment, while allowing foreign investors and their investment to enjoy treatment equal to that for their Chinese counterparts.
The proposed Foreign Investment Law aims to deepen reform, expand opening up to the outside world, promote foreign investment, and better regulate foreign investment management. In order to achieve these objectives, the following principles will be adopted:
1) The Clarification of Legal Intent
The Foreign Investment Law is a fundamental measure aimed at unifying management and promoting foreign investment, under which the organisational form of enterprises will no longer constitute the object of regulation.
2) The Introduction of an Innovative Mode of Foreign Investment Management
The existing system of examining and approving foreign investment on a case-by-case basis will be removed and replaced by foreign investment being managed via pre-access national treatment and a negative list. This will greatly reduce the restrictive measures in place with regard to foreign investment, while broadening foreign investment access, and strengthening information reporting procedures.
3) Improvements to the Foreign Investment Management System
Drawing on the experience of foreign investment management gained over the past 30 or more years, the major systems for a number of processes, such as the merger and acquisition of domestic enterprises by foreign investors and any subsequent national security review, will be incorporated into the Foreign Investment Law and further amended when required.
4) A Change to Government Functions
The current role of the government in providing the prior examination and approval of foreign investment will be changed to that of supplying a public service and strengthening supervision during and after any investment has been made. Following this change, the need for administrative examination and approval will be significantly reduced, while the system for investment promotion, protection, supervision and inspection will be enhanced.
Once the Foreign Investment Law comes into effect, the existing three laws governing foreign-invested enterprises (FIEs) will be repealed. As the Foreign Investment Law will no longer regulate matters such as the organisational form and organisational structure of FIEs, FIEs that existed before this law became effective should - within three years - adjust their organisational form and organisational structure in accordance with the relevant laws and regulations, such as the Company Law.
With regard to the status of Hong Kong, Macau and Taiwan investors, the draft stipulates that the Foreign Investment Law will apply to all such investors. In any case where special treatment for Hong Kong, Macau or Taiwan investors is concerned, it is proposed that this should be provided separately by the State Council.
The draft embraces a total of 170 articles under 11 chapters, namely general provisions, foreign investors and foreign investment, access management, national security review, information report, investment promotion, investment protection, coordinated handling of complaints, supervision and inspection, legal liabilities, and supplementary provisions.
Please click on the following link for further information: Foreign Investment Law of the People’s Republic of China (Opinions Soliciting Draft).
- Mainland China
- Mainland China