China - New Foreign Investment Legislation China -Foreign Investment Legislation
New Foreign Investment Law
In March 2019, the National People’s Congress approved a new foreign investment law that aims to aims to prohibit forced technology transfer and illegal government meddling into foreign business practices. The measure will replace the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Contractual Joint Ventures and the Law on Foreign-Capital Enterprises. The law is set to come into force on January 1, 2020.
The law includes provisions that:
- Explicitly bars Chinese JV partners from stealing IP and commercial secrets from their foreign partners
- Prohibits government officials from using administrative measures to pursue forced technology transfers and makes them criminally liable if they do so
- Ensures foreign investors will receive equal treatment when applying for licenses and participating in government procurement and the formulation of standards
- Shields foreign investments from arbitrary expropriation except in select circumstances for “national security reasons” in which case the company will be given “fair and reasonable compensation”
However, there are concerns about the law’s vagueness and ability to be enforced. The American Chamber of Commerce in China expressed reservations about the law’s lack of detail and consultation with the business community. Skeptics argue that Chinese courts will still side with domestic companies during disputes. The full text of the law can be read here in both English and Chinese.
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