Foreign Investment Law draft implementation approved

China has approved a draft implementation regulation of the Foreign Investment Law in a bid to foster a more inviting environment for foreign investors and better address their concerns through the building of a sound legal framework.

The draft was approved at a State Council executive meeting on Thursday chaired by Premier Li Keqiang. It is aimed at facilitating implementation of the Foreign Investment Law, which was passed in March, and is scheduled to take effect on Jan 1.

The regulation stipulates that forced technology transfer requirements for foreign investors and companies, either through administrative licenses or other means, are prohibited.

It clearly requires equal treatment of domestic and foreign businesses regarding land supply, taxation and fee arrangements.

Foreign companies are entitled to equal participation in the formulation and revision of national, industrial and local standards in accordance with the law. They can make standards-related recommendations, and undertake such work as standard-setting.

Government departments shall not hinder foreign companies from entering government procurement bidding processes, or treat them in any discriminatory fashion.

"The approval of the implementing regulation demonstrates our resolve to attract foreign investment and further open up," Li said.

The new regulation stipulates that local governments and departments are not allowed to violate or renege on policy commitments or agreed contracts made in accordance with the law under the excuse of adjustment in administrative jurisdiction or government transition.

When reviewing applications for market-access licenses in certain industries, government departments are not allowed to set discriminatory requirements targeting foreign investors in terms of licensing conditions, application materials, review procedures and time limits.

Any moves that violate the above articles will face legal consequences, according to the regulation.

It also noted that investors from Hong Kong and Macao shall refer to the Foreign Investment Law and the implementing regulation when investing on the Chinese mainland. For investment on the Chinese mainland made by investors from Taiwan, the Law on the Protection of Investment by Taiwan Compatriots and its implementing regulation shall be applied, and matters not covered shall be addressed by the Foreign Investment Law and the implementing regulation.

"The regulation aims to further strengthen the market-oriented business environment governed by a sound legal framework, and to reassure foreign investors and businesses regarding fair competition," Li said.

Zhu Ning, deputy dean of Tsinghua University's National Institute of Financial Research, said the regulation will "address foreign investor concerns by reassuring them that domestic firms will not enjoy stronger protections", while a level-playing field for government procurement processes will better boost overseas investors' interest in investing in China.