context: The draft law aims to ensure equal treatment and fair competition for both domestic and foreign investments, resonating with the principle of applying ‘competitive neutrality’ to all forms of business ownership, mentioned for the first time in 2019 Government Work Report.
Compared with the existing three laws on foreign investment, the new draft Foreign Investment Law attaches greater importance on equal and fair treatment to both domestic and foreign investment, says People’s Daily.
Following the Party’s 19th Congress Report which calls for equal treatment to all enterprises registered inside China, the draft law stipulates that foreign investors receive the same treatment as domestic investors when they invest in sectors not listed on the negative list.
We used to approve foreign investments case by case, and those failed to be approved could not set up a presence in China, says Wang Shouwen 王受文 MofCOM vice minister. Under the 'pre-establishment national treatment + negative list' approach introduced in the draft law, only investments in sectors mentioned on the list will need to be approved, and those not listed can enjoy equal treatment as domestic enterprises, says Wang, noting that the negative list is getting shorter, with only 48 items on it requiring approval.
Wang also points out that the draft law now allows foreign investors the same right as domestic investors to engage in the standard setting process, compete in government procurement and enjoy preferential policies.
Wang Chen 王晨 NPC Standing Committee vice chairman points out two more aspects that ensure equal treatment
- various parties of an investment deal should agree on the terms for technical cooperation in an equal and fair manner; administrative bodies and their staff must not use administrative means to force technology transfer
- relevant authorities should review foreign investors’ licensing applications the same way they review those of domestic investors