After a month-long consultation period, China’s National People’s Congress today passed the country’s new Foreign Investment Law (the “FIL”). The FIL, which comes into effect on January 1, 2020, will abrogate substantial parts of the legal framework that has governed foreign investment in China for the past 40 years.
First introduced as a draft in 2015, the FIL became bogged down but late last year, an amended version was re-released and then fast-tracked for consultation, in an effort to placate concerns in the EU and the United States about unfair trade practices. In particular, China is accused of limiting market access, forcing technology transfer to Chinese partners and doing little to curb theft of intellectual property, all in violation of its WTO commitments.
The FIL clearly aims to address those concerns but it goes further, overhauling a divided system that regulates inbound investment separately from domestic businesses and which imposes significant restrictions on foreign-invested projects. That system will be unified and standardized.