Publicado: Sol, Marcha 17, 2019
Global | Por Milagro Delgado

China adopts new Foreign Investment Law

China adopts new Foreign Investment Law

"The rush to pass the foreign investment law at this stage is assuredly driven by the pressure from the US-China trade war", said Wang Jiangyu, an associate professor of law at the National University of Singapore.

The law replaces and streamlines three existing laws that govern foreign companies - the Law of Joint Ventures with Chinese and Foreign Investment, the Law on Foreign-Capital Enterprises and the Law on Chinese-Foreign Contractual Joint Ventures.

The law will go into effect on January 1, 2020. The full text has not yet officially been released.

A draft was presented to the parliament last week but the latest revisions have not been made public since then.

The new law was attempting to help level the rulebook between domestic firms and foreign investors in the country.

Washington and Beijing have been locked in a tit-for-tat tariff battle as United States officials press China for an end to practices and policies it argues have given Chinese firms unfair advantages. Although the foreign investment management mechanism has evolved rapidly in recent years, there are still many changes to go both in legislation and in practice.' The research was produced in connection with an upcoming Linklaters report that highlights several key trends that should be viewed as guidelines for success by worldwide companies, investors and brokers seeking to complete Chinese inbound M&A deals.

Under the bill, foreign investors will enjoy the same privileges as Chinese companies in most sectors, unless they have been placed on "negative lists", officials say.

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"The vague language leaves much room for interpretation and makes compliance hard", he added.

China can use reserve requirements and interest rates to support economic growth, Premier Li Keqiang said, promising broad policy steps to prevent a sharper deceleration as the world's second-biggest economy expands at the slowest pace in almost three decades. It then suddenly resurfaced in December, was approved Friday near the end of the annual meeting of China's rubber-stamp parliament, and is set to come into force at the start of 2020.

The European Union Chamber of Commerce in China had earlier complained that Beijing was rushing the investment law to appease the United States. He added that "the law offers a more broad-based retaliation".

"Moreover, we can deploy quantity-based or price-based policy tools such as reserve requirements and interest rates".

Further cuts in RRR had been widely expected this year, after fresh data pointed to persistently soft demand in the Asian economic giant, raising fears of a sharper slowdown.

An across-the-board cut in borrowing costs could also risk another flare-up in debt and speculative activity like that in the wake of the 2008-9 global financial crisis.

The premier announced in a 2019 work report delivered on March 5 that the Value-Added Tax for the manufacturing sector would be cut to 13 per cent from 16 per cent. Value-Added Tax for the transport and construction sectors will be reduced to 9 per cent from 10 per cent. William Liu, managing partner for Linklaters in China, commented "the increasing liberalisation of foreign investment into China will be a key component for the development of the Chinese economy to move up the value chain, to meet the needs of its growing middle class, and to boost exports".

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