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China approves foreign investment law, possible US olive branch
BEIJING, March 15, 2019 (BSS/AFP) – China’s rubber-stamp parliament
approved a foreign investment law on Friday that was fast-tracked and may
serve as an olive branch in trade talks with the United States.
The legislation aims to address long-running grievances from foreign
businesses, but the US and European chambers of commerce have voiced concerns
that they were not given enough time to give their input.
The National People’s Congress voted 2,929 in favour of the law — with
eight against and eight abstentions — barely three months after a first
draft was debated, an unusually quick turnaround for the legislature, which
meets once a year.
The move comes as US and Chinese negotiators have held complex talks aimed
at resolving a months-long trade war that has pounded businesses with tariffs
on $360 billion in two-way commerce.
US President Donald Trump said Thursday the negotiations should wrap up
within four weeks, adding: “We are getting what we have to get.”
China’s top trade negotiator, Liu He, held phone talks with US Treasury
Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer, with
the official Xinhua news agency saying they made “substantial progress”.
The bill will eliminate the requirement for foreign enterprises to transfer
proprietary technology to Chinese joint-venture partners and protect against
“illegal government interference” — major sticking points in the trade
negotiations.
It also promises to abolish the “case-by-case approvals” process for
foreign investments, officials say.
The changes will ensure that foreign investors will enjoy the same
privileges as Chinese companies in most sectors, except those placed on a
“negative list”.
Beijing uses negative lists to identify areas that are either off-limits to
non-state businesses or that require them to go through an application and
approval process.
The American Chamber of Commerce in China said in a statement this week
that it “welcomes and appreciates this legislative effort to improve the
foreign investment climate”.
But it added that it was concerned that “such an important and potentially
far-reaching piece of legislation will be enacted without extensive
consultation and input from industry stakeholders”.
The provisions in the legislation were “quite general” and failed to
address a number of concerns from foreign firms, including “the potential for
unequal treatment” of businesses and the “broad scope” of national security
reviews, the chamber said.
– ‘Positive’ additions –
Despite the promised changes, businesses will still need to “jump…
several hurdles” to gain market access, said Kyle Freeman, a lawyer at Dezan
Shira & Associates.
“There are continued concerns that the on-the-ground reality of industry-
specific laws, regulations, and local administrative approvals… may impede
full market access at the implementation level despite provisions in the
negative list,” he told AFP.
The European Union Chamber of Commerce in China had earlier complained that
Beijing was rushing the investment law to appease the United States.
A draft was presented to the parliament last week but the latest revisions
have not been made public since then.
A source who has seen the document told AFP that it includes a new article
on protecting foreign companies’ commercial secrets.
It also fleshes out criminal penalties for officials who leak confidential
information they obtain from overseas businesses, the source added.
The reported changes “are positive late additions that address concerns of
US industry,” Jacob Parker, vice president of China operations at the US-
China Business Council, told AFP.
“I think we can safely assume that this language is a result of the trade
negotiations as it was slipped in at the last minute.”
The law will come into effect from January 1, 2020, according to the
unpublished draft.
Beijing sees the law as a tool to attract more foreign investment as its
economy slows, with the government last week presenting a growth target of
6.0 to 6.5 percent this year, down from 6.6 percent growth in 2018.
BSS/AFP/GMR/0941 hrs