Abstract

۱ Introduction

۲ FIL Background

۳ Highlights of the FIL

۴ The Road Ahead: Implementation of the FIL

۵ Conclusion: Towards a New Era of the Foreign Investment Law Regime

References

Abstract

     China’s foreign investment law regime has experienced significant changes in recent years. A milestone came with the passing of the Foreign Investment Law (FIL) in 2019, replacing the laws and regulations that had governed foreign investment in China for four decades. This article first undertakes a political economic analysis to determine the relevance of internal and external factors contributing to the changes. It then discusses the key characteristics of the FIL and reveals how it is designed to create a liberal, stable, fair, transparent and accountable regime to promote and protect foreign investment. Although the passage of the FIL ushered in a new era of foreign investment in China, many important issues remain unresolved and further actions must be taken to ensure its smooth implementation. To support the sustained development of its foreign investment regime, China must address existing laws and regulations that are incompatible with the new regime, clarify key issues that the new law fails to address, issue clearer guidance on national security, shorten its ‘negative list’, promote opening up and enhance regulatory transparency.

Introduction

     On 15 March 2019, China passed the Foreign Investment Law (FIL)Footnote1 that demonstrated its commitment to providing a level playing field for foreign investors. Entering into force on 1 January 2020, together with its corresponding Implementation Regulation, the FIL put an end to the three primary laws that had governed foreign investment in China for four decades, namely the Sino-Foreign Equity Joint Venture Law, the Sino-Foreign Cooperative Joint Venture Law and the Wholly Foreign-owned Enterprises Law (together, the Three Laws). With unified provisions on market access, investment promotion, investment protection and foreign investment management, the FIL represented a milestone in China’s endeavour to open up to foreign investment through the rule of law. The law was promulgated to address international concerns, to summarise the domestic experience and to improve the business environment. In the face of unprecedented uncertainties and rising protectionism in the global economy, the law was intended to create a ‘golden age’ for foreign investors in China.Footnote2 Against this backdrop, this article first presents an overview of the development of China’s foreign investment law regime, delving into the economic, political and external factors that led to the enactment of the FIL. It then highlights the main features of the FIL. The third part of the article summarises the problems with the law that remain to be resolved and the measures required for its smooth implementation. Specifically, to support the sustained development of its new foreign investment regime, China must revise existing laws and regulations that are incompatible with the FIL, clarify key issues that the FIL fails to address, issue detailed guidance on national security, shorten the ‘negative list’ to promote opening up and enhance the transparency of the regulatory system.

Conclusion: Towards a New Era of the Foreign Investment Law Regime

     With the adoption and implementation of the FIL, the laws and regulations that have governed China over the last four decades fall away. The FIL establishes the basic framework for a new type of foreign investment legal regime and unifies provisions on market access, investment promotion, investment protection and investment management. As a landmark piece of legislation in China’s foreign investment law regime, the FIL is underpinned by a combination of internal experience and international practice. It provides a stronger legal guarantee of further opening up and the active and effective utilisation of foreign investment. With the adoption of the FIL, China is entering a new era of foreign investment wherein a level playing field will be created and a more stable, fair and transparent regime will be established.