The document summarizes key points of China's foreign investment law: 1. The law now allows Chinese natural persons to invest in sino-foreign joint ventures, changing a past rule. 2. It defines forms of permitted foreign investment as direct investment, mergers and acquisitions, investment in new projects, and other approved forms. 3. Foreign investors receive pre-entry national treatment and are subject only to rules on a negative investment list, with equal treatment for non-listed investments. 4. The law provides protections for foreign investment such as national treatment, intellectual property protections, business secret protections, and ensuring policy commitments are upheld.

1. PRC Foreign Investment
Law - Key Points
Article 2 Keyp points: other
investors. It includes the “Chinese
natural persons”.
In the past, Chinese natural persons were
not allowed to be an investor of a sino-
foreign joint venture. Now this rule
changed. Chinese natural persons can be
an investor of the joint venture.
Article 2 Investment Activities
This article has provided that the forms of
foreign investment can be one of the
following:
1. direct investment (WFOE and Sino-foreign
joint ventures),
2. merger and acquisition of Chinese
enterprises,
3. investment in new projects and,
4. other forms which are permitted by law.
Here “new projects” refer to those projects
in which
1. parties involved in build their relations
through contracts/agreements,
2. The projects may be the ones to explor
natural source or to develop large
infrastructure construction.
Article 4 Pre-entry national
treatment and negative list
Pre-entry national treatment is defined as
treatment given to foreign investors at the
stage of entry in which the investment
standards are not lower than that of
domestic investors and their investments;
the negative list refers to state regulations
for foreign investment in specific areas to
include special management measures for
investment implementation approval. The
state shall ensure equal national treatment
to foreign investment excluded from the
negative list.
Currently the effective negative list is
Special Admin Measures for Foreign
Investment access into China (2021).
Article 9 equal application of
China’s supporting policies
This article has provided that all the policies
that the government has made to support
the development of enterprises shall be
equally applied to foreign invested
enterprises.
Article 10 Opinions from FIE are
to be respected
This article has provided that the legislative
organizations shall solicit opinions from
foreign invested enterprises when it comes
to the legislation of lawns and regulations
concncering foreign investment.
This article has provided that all the judicial
verdicts related to foreign investment shall
be disclosed to public. It is a judicial rule in
China that all the judicial verdicts shall be
open to public. Here it is a restatement of
national treatment.
Article 13 Special promotion to
foreign investment
This article has provided that the state will
set up special economic zones when it is
necessary or implement pilot policies to
promote foreign investment in some areas.
It shows that China will continue to
welcome foreign investment into the
country; the pilot policies may be
preferential to foreign invesment.
Article 14 Guidance and prefential
treatment
This article provided that the state will
encourage and guide foreign investment to
certain areas and industries; meanwhile
foreign investment may enjoy preferential
treatment that is provided by laws and
regulations.
Article 15 Equal engagement in
standards making
This article has provided that foreign
invesment has the rights to join the process
of standards building of industries.
Article 16 Equal engagement in
public procurement
This article has provided that foreign
invested enterprises has the right to equally
take part in public procurement. This is a
restatement of national treatment.
Article 17 Financing in China
This article has provided that foreign
invested enterprises may do its security
financing by IPO and bonds in the Chinese
market.
It is restatement of national treatment.
Article 20 No levy
This article has provided that the state shall
not impose levy on foreign invested
enterprises.
Even if levy is necessary in situations, for
the sake of public interest, reasonable
compensation shall be given.
Article 21 Free entry and exit of
capital and profit
This article has provided that the capital
that foreign investors has paid and the
profit that foreign investors has obtained
from the investment activities is allowed to
be remitted out of China.
Article 22 Protection of
Intellectual Properties
This is a restatement of national treatment.
There are PRC Trademark Law, PRC
Copyright Law and PRC Patent Law that
protects the benefit of all enterprises
including the foreign investment ones.
Article 23 Protection of business
secrets
This article has provided that administrative
organs and its staff members shall keep
confidential on the business secrets of
foreign invested enterprises if they has
obtained such business information in
communication with foreign invested
enterprises.
China is in the legistration process of
Business Secrets Protection Law. Before it
is enacted, there are administrative rules
that protect the business secrects of
enterprises.
Article 25 Policies commitment
should be carried out
This article has provided that the policies
commitment made by local government to
foreign invested enterprises shall be carried
out. Even if the commitment should be
amended due to national interests, the
amendment shall be made in the legal
procedures and reasonable compensation
shall be made to the foreign invested
enterprises.
Article 31 Corporate Structures
This article has provided that the structures
and operating procedures of foreign
invested enterprises shall be subject to the
provisions of PRC Company Law and PRC
Patnership Enterprises Law.
In the past the structures and operating
procedures of sino-foreign joint ventures
and sino-foreign contractual ventures are
different from those under Company Law.
After the Foreign Investment Law becomes
effective, foreign invested enterprises shall
practice in the structures and under
operating procedures of Company Law and
Partnership Enterrpises Law.
Article 33 Concentration of
operators
This article has provided that If a foreign
investor acquires a Chinese domestic
enterprise or participates in the
consolidation of other business operators in
other ways, it must comply with anti-
monopoly assessments of the business
operator in accordance with the provisions
of the Anti-Monopoly Law of the People's
Republic of China.
Concentration of operators usually engage
in business over billions. Therefore
common investment won’t come to this
problem unless the investment is especially
huge.
Article 34 Reports to be made
Article 35 When national
securities are concerned
This article has provided that the foreign
invested enterprises should make reports
to administrative offices in due procedures.
In the past the foreign invested enterprises
need to go through annual joint inspection
by several administrative offices; many
reports had to be provided and many
administrative offices were involved. Now
the new reporting system has made things
simplified.
The detailed procedures of report is
provided in the Administrative Meassures
on Matters to Be Reported by Foreign
Invested Enterprises. According to the
Measures, following subjects should be
reported to relevant offices:
1. Setting up of a foreign invested
enterprises;
2. Key changes of the enterprises, such as
changes of investors/shareholders,
directors of the board, general managers,
business scope and etc;
3. Annual business summary.
This article has provided that foreign
investment should go through security
review for approval when the investment is
concerned with national security.
The implementing rules of the above article,
Measures on Security Review of Foregin
Investment, has provided on what subjects
should go through national security review.
When the foreign investment is concerned
with military, important agricultural
products, important infruscture
constructions, important cultural products
and services, important technologies and
internet products as well as import financial
services.
Investment on the aforesaid subjects
should go through security review before
the investment is approved.
Fashion Law in China
This is an introduction of foreign investment law in China. It includes the
following chaapers:
1. Foreign investment law of China;
2. What protections can foreign investment get under law?
2. What compliance rules should foreign investment abide by?
It is a part of my ebook Fashion Law in China.
Apeng Shang