China foreign investment: How doing business will change
BBC Report : Compiled by Noor Majid
China is rushing through a foreign investment law in an apparent attempt to placate Washington as negotiators try to dig the world’s two largest economic powers out of an ongoing trade war. But will it work?
The 3,000 or so delegates to China’s annual National People’s Congress (NPC) will endorse the new law on Friday. They don’t oppose legislation. That’s not how it is done here. When a vote is taken there are normally only handfuls who vote against. Some of them potentially for show, because 100% “yes” votes one after another would look ridiculous.
If there is pushback against a draft bill and amendments made, this happens well before the NPC sits, at a series of standing committee meetings behind closed doors. The process can take years. This time it took three months.
The Chinese government appears to have rushed through the investment law as an olive branch to the US amid trade war negotiations. However, many in the business community here in China see this law as a kind of sweeping set of intentions rather than a specific, enforceable set of rules. They fear it could be open to different and changing forms of interpretation.
The big-ticket items it is said to address, in terms of the concerns of foreign companies, include intellectual property theft, the requirement for international firms to partner up with a local entity, and unfair subsidies to Chinese companies. It will also address the preferential treatment in awarding contracts to Chinese companies, and forcing foreign firms to hand over their technological secrets as the price of entry to the massive Chinese market.
But this law isn’t going to help everyone.
There is a “black list” of 48 sectors that will not be open to foreign investment or, in some cases, not open without conditions or special permission. For example, there is a complete ban on investing in fishing, gene research, religious education, news media, and television broadcasting. Partial investment is allowed in oil and gas exploitation, nuclear power, airlines, airport operation, and public health, amongst others sectors. Non-renewable energy automobile production will require partnerships for a few years but then be phased out.
For industries not on the list, the principle is that foreign companies will receive the same treatment as their Chinese counterparts.