China looks to fundamentally change how it handles foreign investment
Published 6 February 2015
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1. Summary
China calls for comments on its Draft Foreign Investment Law. A number of the proposals could amount to a real improvement in the business environment for foreign firms.. The key question is which sectors will be liberalised for foreign investment, which may be linked to ongoing US-China and EU-China investment agreement negotiations.
2. Detail
2.1 What is it?
The draft law is the latest initiative in China’s economic reform efforts. The proposals would represent a major step towards levelling the playing field for foreign business. For example it would roll out the negative list (being trialled in the Shanghai Free Trade Zone) nationwide; and level the playing field between foreign and domestic investments (“national treatment”).
There is no specific time table for the final implementation of the new Law, but by 2017 seems an informal deadline.
2.2 What are we doing?
The EU is submitting Member States’ comments to the Chinese. We have written to the EU setting out the UK’s views. Chambers, business and colleagues have been updated, consulted and priorities fed into the the Chinese system. Priority areas where the UK wishes China to relax its investment restrictions are education, legal services, accounting and audit, financial services and healthcare provision where foreign investment remains severely restricted.
3. Comment
Key business opinion formers are hopeful that the proposals would make it easier to do business, removing a layer of local government approvals.
The move to a) pre-establishment of national treatment and b) a negative list is welcome. It is for the Chinese to put them in place quickly and make the list of restrictions short,but they may want to link them to negotiations on bilateral Investment Treaties with the US and the EU.
The proposed law is in line with Chinese efforts to improve the business environment spelled out very clearly at the 3rd Plenum. It would also be a significant step in pursuit of the aim Li Keqiang has described as the transformation of the role of government – shifting from a culture where “you can’t do it unless it says you can” to one where “you can do it unless it says you can’t”.
4. Disclaimer
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