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Introduction of the proposed foreign investment law in China

On Behalf of | Jan 30, 2019 | Uncategorized

We have spoken many times about Chinese efforts to introduce legislation that provides greater protections for foreign businesses. However, there continues to be debate regarding the effectiveness of legislative efforts.

The Chinese government obviously wishes to reduce disputes with American officials. Because of this, China is now in the process of introducing a new foreign investment law. Purportedly, this would ban forced technology transfers. It would also provide increased protections pertaining to intellectual property rights for foreign businesses.

Efforts to prevent further trade war disputes

The National People’s Congress will vote upon this legislation during its March 5 session. According to a Washington Post article, it’s almost certain to be approved. One Chinese lawmaker states there’s “an urgent need” for this sort of legislation. While such legislation usually takes over a year to pass, it looks like this will become law in approximately three months.

Foreign investment is obviously important for the Chinese economy. China is facing a possible economic slowdown, and foreign investment is key in partially preventing an economic lapse.

Such reforms occasionally crop up due to pressures from the United States. In China, there are concerns that the U.S. administration will increase tariffs on Chinese imports. The U.S. would like to decrease the Chinese trade surplus. Currently, there is $2.1 trillion in foreign-funded business operating in China. So, while Chinese maybe making such reforms, we still need to see how U.S. officials will respond to reduce trade tensions.

This is all of utmost importance to American companies hoping to invest in a particular Chinese business. Companies require knowledge of Chinese law and culture before making such investments. They also need legal guidance on whether investment in a Chinese business is prudent under the circumstances. Investment mistakes by companies can prove to be costly.