Foreign firms laud update to China's investment law

Overseas investors are applauding the government's move to create a new law for foreign investment in China, as the protection specified in this legislation will increase their confidence about investing in the country.

The draft foreign investment law, which is being reviewed by top lawmakers during China's ongoing two sessions, not only clarifies the administrative principles for overseas investors in China but also provides rules to protect their interests. A final vote for it is scheduled on Friday.

For example, the law will strengthen the protection of intellectual property rights (IPR) of enterprises investing in China and ban any move to force foreign companies to provide technology transfers to their Chinese partners.

"The new foreign investment law is a strong signal of China's determination in further opening up and promoting foreign investment... we undoubtedly welcome this new law to make the investment environment more fair and transparent," said Paul Lindblad, president of Wacker China, a Germany-based chemical company that has been in China for about two decades.

Rachel Duan, senior vice president of US-based General Electric Company (GE), which took part in the discussion of the draft law in recent years, also said that making the new foreign investment law signifies that China is taking a key step toward deeper institutional openness.

KEY ISSUES

Overseas companies are hoping that the new law can address some of the most important issues they face in the Chinese business environment, such as IPR protection.

Lindblad said that Wacker is very much looking forward to the new law's reinforcement of IPR protection.

"The new law's emphasis on IPR protection makes us more confident about increasing our research and development investment in China," he noted.

William Yu, president of Honeywell China, a US-based conglomerate providing industry solutions and engineering services, said that Honeywell welcomes "any efforts (from the Chinese government) to support technological cooperation and IPR protection."

Equal treatment is also a key issue, with overseas investors hoping to get equal treatment guarantees under the new law. Lindblad said that he holds high expectations of the new law in affirming that domestic and foreign companies are equal in principle to enjoy China's policy support.

Duan said that GE is also "happy" to see that the new law has "transparent, foreseeable and fair" expressions on the two issues that of most concern to overseas investors: national treatment and IPR protection, according to a written statement GE sent to the Global Times.

INTERNAL NEEDS

The draft law is proceeding at a time when the US is pushing China to enhance market equity for overseas investors and solve problems like insufficient IPR protection and forced technology transfers.

Tian Yun, vice president of the Beijing Economic Operation Association, said that the launch of the new law is not just a response to overseas pressure, but more importantly is what China itself needs.

"China is urgently in need of a formal, clear, high-quality overseas investment law to replace the current ambiguous, scattered laws and regulations for overseas investors, so as to improve the business climate and boost overseas investment," he told the Global Times on Tuesday.

"The investment cycle and the next cycle, which involves generating profits for an overseas investor, often take a long time, sometimes a decade. Only when an overseas investor has confidence in China's business environment does he dare to invest in the market," Tian said.

China used 885.6 billion yuan ($131.95 billion) worth of overseas capital in 2018, up 0.9 percent on a yearly basis, compared with growth of 7.9 percent in 2017, according to data released by the Ministry of Commerce.

However, Lindblad said that overseas companies have already sensed the improvements in China's business environment for overseas investment.

"We have received continuous guidance and support from the local governments where we have operations...and we have seen the efforts that China's government has made over the years to make foreign investment more convenient, especially in the past two years," he said.

For example, he said that in Shanghai, where his company's China headquarters is based, 95 percent of the foreign projects can now complete filing procedures within only three working days, which is "very impressive improvement."