The proposed new law on foreign investment, pending approval at the 13th National People's Congress (NPC), is essentially different from the three existing laws on Chinese-foreign equity or non-equity joint ventures, and wholly foreign-owned enterprises. 

Illustration: VCG

Professor Ding Yuan, vice president and dean of China Europe International Business School (CEIBS), believes that once adopted and implemented, foreign investment law could be quite promising and positive, as it will replace three existing ones and emphasize the equal treatment of both domestic and foreign investors, subject only to a negative list in certain sectors. 

“For the first time, from a legislative perspective, foreign investment will not be regarded as extra support to the domestic economy. Such a solid legal base will significantly foster foreign investors’ confidence about their long-term development in China,” Ding said during an exclusive interview. 

The last three decades saw a big surge by the Chinese economy and China has emerged as the strongest and biggest manufacturer in the world. 

After joining the WTO, China has become a vital player in global trade. Being an attractive destination for foreign investment, China's 2014 foreign direct investment outflows reached $116 billion, marking China’s two-way investment close to balance for the first time.

In 2018, China's outbound direct investment rose 4.2 percent year-on-year to $129.83 billion, according to the Ministry of Commerce.

As China transforms into a more sustainable consumption-driven and innovative economy, the urge for a more open, fair and transparent environment for all types of investors is vital. 

With the establishment of the foreign investment law, we will see a critical and strategic turning point. In turn, more and more foreign-capital enterprises will become responsible Chinese corporate citizens rather than just positioning China as a manufacturing base. “Made in China, Sold Globally” would be replaced by “Investing in the entire value chain to better serve Chinese consumers,” Ding stressed. 

In addition to protecting intellectual property and prohibiting forced technology transfer, the draft law said “The state will not expropriate foreign investments. If expropriation is required in the public interest, the state should apply procedural fairness and provide fair and reasonable compensation.” This would help reassure the rest of the world that China is on track towards a more open market economy. 

We would expect a more friendly investment environment for Chinese investors overseas, especially in Europe, as concerns about less-than-reciprocal levels of market access could be strongly addressed through the new law, he added.

“We sincerely hope that there will soon be a final version of the new law and that it can be implemented in a timely manner. While the negative list will go effective, with more clarified procedures for efficient law enforcement,” Ding said. 

The annual NPC session will later review a draft foreign investment law to protect foreign investors' legitimate rights and interests.