Abstract
Article 1 In order to further expand opening up, actively promote foreign investment, protect the legitimate rights and interests of foreign investment, standardize foreign investment management, facilitate the establishment of a new pattern of comprehensive opening-up, and promote the healthy development of the socialist market economy, this Law is enacted in accordance with the Constitution.
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Notes
- 1.
Article 1 of the Chinese-Foreign Contractual Joint ventures Law in 1988: “This Law is formulated in order to expand foreign economic cooperation and technical exchanges and promote foreign enterprises and other economic organizations or individuals (hereinafter referred to as foreign venturers) to jointly set up Chinese-foreign contractual joint ventures (hereinafter referred to as contractual joint ventures) in China with enterprises or other economic organizations of the People’s Republic of China (hereinafter referred to as Chinese venturers) in accordance with the principle of equality and mutual benefit”; Article 1 of the Chinese-foreign Equity Joint Ventures Law in 1979: “In order to expand international economic cooperation and technical exchanges, the People’s Republic of China allows foreign companies, enterprises and other economic organizations or individuals (hereinafter referred to as foreign joint venturers) to jointly establish joint ventures with Chinese companies, enterprises or other economic organizations (hereinafter referred to as Chinese joint venturers) within the territory of the People’s Republic of China with the approval of the Chinese government in accordance with the principle of equality and mutual benefit”; Article 1 of the Wholly Foreign-owned Enterprises Law in 1986: “In order to expand foreign economic cooperation and technical exchanges and promote the development of China’s national economy, the People’s Republic of China allows foreign enterprises and other economic organizations or individuals (hereinafter referred to as foreign investors) to set up wholly foreign-owned enterprises in China and protects the legitimate rights and interests of wholly foreign-owned enterprises.”
- 2.
No clear definition of negative list is given in official documents except in the Opinions on Implementing the Negative List System for Market Access, which was issued by the State Council on 19 October 2015. According to the Opinions, a negative list for market access includes two categories: “prohibited” and “restricted” items. It applies to the investment and business operations made by all kinds of market players on a voluntary basis, including initial investment, expansion investment, mergers and acquisitions as well as other market entry. For prohibited items, market players have no access to them and administrative bodies are not allowed to give review and approval or handle relevant formalities. For restricted items, market players may file an application and administrative bodies make the decision according to the law whether they are given access; or market players may enter these areas in accordance with government regulations on access conditions and methods. All kinds of market players may enter sectors, areas, and businesses outside the negative list on an equal basis and according to the law.
- 3.
The Central Committee of the Communist Party of China, Decisions on Several Major Issues of Comprehensively Deepening Reform, http://www.china.org.cn/china/third_plenary_session/2014-01/16/content_31212602.htm.
- 4.
Introduction of corporate social responsibility is to building a connection between business and society and to strike a balance between business operations and social welfare.
- 5.
Decision of the CPC Central Committee on Several Major Issues Concerning the Comprehensive Promotion of the Rule of Law, retrieved from http://cpc.people.com.cn/n/2014/1029/c64387-25927606.html.
- 6.
Normative documents, in a narrow sense, refer to legislative and regulatory documents, that is, the constitution, laws, administrative regulations, local regulations, regulations of autonomous regions, separate regulations, ministerial rules and local government rules, and other regulatory documents by state agencies. In a broad sense, apart from the above, normative documents include other binding non-legislative documents, e.g., documents formulated by party organizations at all levels, people’s governments at all levels and their subordinate work departments, people’s organizations, social organizations that are made generally applicable.
- 7.
Article 8 of the Provisions of the Supreme People’s Court on People’s Courts’ Publication of Judgments on the Internet (http://wenshu.court.gov.cn/).
- 8.
Liu Heng, Government Information Disclosure System, China Social Sciences Press, 2004, p. 12.
- 9.
The FTAs include China–Singapore FTA, China–New Zealand FTA, and China–ASEAN FTA, China–Chile FTA, China–Switzerland FTA, etc.
- 10.
The FTAs that are under negotiation include the China–Japan–South Korea FTA, China–Norway FTA, China–Sri Lanka FTA, China–Israel FTA, and the FTAs that are under upgrading negotiation include China–Korea FTA, China–Pakistan FTA.
- 11.
The Pilot Free Trade Zone refers to a specific area outside the customs border of a country or region to allow foreign goods to enter and exit freely without tariffs. In 2011, the central government initially established plans and ideas for establishing free trade zones in Qingdao, Tian**, Shanghai, and Shenzhen. On 29 September 2013, the Shanghai Free Trade Zone was first established and became China’s first pilot free trade zone. On 21 April 2015, Guangdong Free Trade Zone, Tian** Free Trade Zone, and Fujian Free Trade Zone were unveiled one after another. On 1 April 2017, the Liaoning Free Trade Zone, Zhejiang Free Trade Zone, Henan Free Trade Zone, Hubei Free Trade Zone, Chongqing Free Trade Zone, Sichuan Free Trade Zone, and Shaanxi Free Trade Zone were inaugurated and established. The only free trade port is Hainan Free Trade Port launched in 2018.
- 12.
The report of the 19th National Congress of the Communist Party of China emphasized the necessity to give the pilot free trade zones greater autonomy of reform. In order to implement the decision and support the deepening of reform and innovation in the pilot free trade zones and further improve the quality of their construction, the State Council issued the Notice on Several Measures to Support the Deepening of Reform and Innovation in Pilot Free Trade Zones in November 2018. The notice pointed out in the introduction that the construction of a pilot free trade zone is a strategic move by the Party Central Committee and the State Council to comprehensively deepen reforms and expand opening up under the new situation. http://www.gov.cn/zhengce/content/2018-11/23/content_5342665.htm.
- 13.
The notice outlines such reform measures in free trade zones as building a good investment environment, improving trade facilitation, promoting financial innovation to serve the real economy, advancing pilot trials in the field of human resources.
- 14.
Catalogue of Industries Encouraging Foreign Investment (Draft for Solicitation of Opinions), see more at http://wzs.ndrc.gov.cn/glwstzcyml20190201.pdf.
- 15.
Elaborations on Revising the Catalogue of Industries Encouraging Foreign Investment, http://images.mofcom.gov.cn/wzs/202007/20200731141703586.pdf.
- 16.
The “Opinions” includes the principles, scope, ways of participation, ways of participation, intellectual property protection and requirements for foreign-invested enterprises to participate in China’s standardization work. For the first time, it has been clarified that foreign-invested enterprises are the main body participating in China’s standardization work, and it is stipulated that thee foreign-invested enterprises legally established in China shall enjoy the same treatment as domestic-invested enterprises to participate in the country’s standardization work, and clarified the content, methods, and requirements for participation in the formulation and revision of China’s national standards by foreign-invested enterprises. For example, they may participate in the drafting of national standards and the translation into foreign language versions of national standards, and they may also provide advices in the process of identification of standard project, solicitation of opinions, and standard implementation.
- 17.
Article 13 of the Implementation Regulations provides “foreign-invested enterprises may submit standard project proposals to the standardization administrative department and relevant administrative departments, and provide opinions and suggestions in the process of standard project establishment, drafting, technical review, and standard implementation information feedback and evaluation, and undertake standard drafting, technical review-related work and work concerning translation of standard into foreign languages.”
- 18.
Article 15 of the Implementation Regulations further provides that “the government and its relevant departments shall not obstruct or restrict foreign-invested enterprises from freely entering the government procurement market in this region and industry.”
- 19.
Article 42 of the Implementation Regulations reads: “If purchasers and procurement agencies in government procurement apply differential or discriminatory treatment to foreign-invested enterprises on unreasonable conditions, their legal liabilities shall be investigated in accordance with the provisions of the Government Procurement Law and its implementing regulation.”
- 20.
Government Procurement Law of the People’s Republic of China and its amendment. http://www.ccgp.gov.cn/gpsr/zcfg/201710/t20171025_9047644.htm.
- 21.
See more in “Legislative Arrangements of the Ministry of Finance in 2019: to start the legislative research on the revision of the Government Procurement Law”, http://www.ccgp.gov.cn/news/201903/t20190321_11786265.htm.
- 22.
Notice on Suspension of the Transfer of State Shares and Legal Person Shares of Listed Companies to Foreign Investors. http://www.gov.cn/xxgk/pub/govpublic/mrlm/201011/t20101112_62555.html.
- 23.
See full text of the Notice of the General Office of the Ministry of Foreign Trade and Economic Cooperation on Relevant Issues Concerning Foreign-invested Joint Stock Companies at http://www.mofcom.gov.cn/aarticle/bh/200301/20030100063322.html.
- 24.
See full text of the Several Opinions on Issues Related to Listed Companies involving Foreign Investment at http://www.csrc.gov.cn/pub/newsite/ssb/ssflfg/bmgzjwj/ssbgcz/200906/t20090624_108136.html.
- 25.
For relevant information, see “Listing Policy of Foreign-funded Enterprises: A Factor of Ups and Downs”, Listed Companies, 2002(2).
- 26.
State Council: Foreigners can directly invest in A shares to support IPOs of foreign-invested enterprises at the border, https://finance.sina.cn/2018-06-19/detail-iheauxvz8470118.d.html?from=wap.
- 27.
Article 19 reads: “Local people’s governments at or above the county level may formulate foreign investment promotion and facilitation policies and measures in terms of fee reduction and exemption, land use index guarantees, and public service provision within their legal powers in accordance with the provisions of laws, administrative regulations, and local regulations.”
- 28.
The Charter of Economic Rights and Duties of States was adopted by Resolution 3281 (XXIX) of the 235th Plenary Session of the United Nations General Assembly on 12 December 1974. Article 2.2(a) provides “Each State has the right: (a) [t]o regulate and exercise authority over foreign investment within its national jurisdiction in accordance with its laws and regulations and in conformity with its national objectives and priorities.”
- 29.
For example, see Article 5 of the BIT between China and Turkey and Article 4 of the BIT between China and Korea.
- 30.
The Notice was issued State Plan Commission, Ministry of Electricity and Ministry of Transportation by in 1995.
- 31.
The State Council adopted the Regulations on 25 December 1995.
- 32.
Interim Regulations, which were promulgated in 1981, were replaced by the Regulations on the Foreign Exchange Administration in 1996. The latter was amended in 2008.
- 33.
Article 23 of the Civil Code reads:
“Intellectual property rights are the exclusive rights enjoyed by the right holders in accordance with law over the following subject matters:
(1) works;
(2) inventions, new utility models, or designs;
(3) trademarks;
(4) geographical indications;
(5) trade secrets;
(6) layout designs of integrated circuits;
(7) new plant varieties; and
(8) the other subject matters as provided by law.”
- 34.
State Intellectual Property Office, Outline of the National Intellectual Property Strategy, https://www.wipo.int/edocs/lexdocs/laws/en/cn/cn021en.pdf.
- 35.
Section 301 investigation, which is carried out on the basis of Article 301 of the amended Trade Act of 1974, is commonly referred to as unilateral sanction. Section 301 is one of the principal statutory means by which the United States enforces its rights under trade agreements and addresses “unfair” foreign barriers to US exports. Section 301 procedures apply to foreign acts, policies, and practices that the USTR determines either (1) violate, or are inconsistent with, a trade agreement; or (2) are unjustifiable and burden or restrict US commerce. The measure sets procedures and timetables for actions based on the type of trade barrier(s) addressed. Once the USTR begins a Section 301 investigation, it seeks a negotiated settlement with the foreign country concerned (either through compensation or an elimination of the particular barrier or practice). For cases involving WTO agreements or other trade agreements, the USTR is required to use the formal dispute proceedings specified by the agreement. For Section 301 cases (except those involving a trade agreement or an IPR issue) the USTR has 12–18 months to seek a negotiated resolution. If one is not obtained, the USTR determines whether to retaliate (which usually takes the form of increased tariffs on selected imports) at a level equivalent to the estimated economic losses incurred by US firms from the foreign barrier or practice.
- 36.
Based on the Section 301 investigations, the Trump Administration subsequently increased tariffs by 25% on three tranches of tariff products with combined value of $250 billion worth of imports from China and has threatened to boost tariffs on nearly all remaining products from China (valued at $300 billion). China has increased tariffs (at rates ranging from 5 to 25%) on $110 billion worth imports from the United States.
- 37.
Articles 27–30, which are listed below, were deleted to leave the issues to be decided by the contract.
Within the term of validity of a contract for technology import, an achievement made in improving the technology concerned belongs to the party making the improvement. Article 28 reads: “After a technology import contract expires, the technology supplying and receiving parties thereto may negotiate on the continued use of the technology according to the principle of justice and equity.” Article 29: “A technology import contract shall not contain any of the following restrictive clauses: (1) requiring the receiving party to accept any additional condition unnecessary for the technology import, including buying any unnecessary technology, raw material, product, equipment or service; (2) requiring the receiving party to pay exploitation fee for a technology when the term of validity of the patent right in which has expired or the patent right of which has been invalidated, or to undertake other relevant obligations; (3) restricting the receiving party from improving the technology supplied by the supplying party, or restricting the receiving party from using the improved technology; (4) restricting the receiving party from obtaining technology similar to that supplied by the supplying party from other sources or from obtaining a competing technology; (5) unduly restricting the receiving party from purchasing raw material, parts and components, products or equipment from other channels or sources; (6) unduly restricting the quantity, variety, or sales price of the products the receiving party produces; or (7) unduly restricting the receiving party from utilizing the channel for exporting products manufactured using the imported technology.”
- 38.
Article 24 of the Implementation Regulations provides that “[a]dministrative organs (including organizations authorized by laws and regulations to manage public affairs, similarly hereinafter) and their employees shall not implement administrative licensing, administrative inspection, administrative punishment, administrative compulsion and other administrative actions to force or disguisedly force foreign investors and foreign-invested enterprises to transfer their technologies.”
- 39.
Article 29 of the Implementation Regulations.
- 40.
Ibid.
- 41.
See the official website of American Chamber of Commerce in China, https://www.amchamchina.org/.
- 42.
See Item 2 of the Decision of the State Council on Amending Some Administrative Regulations (Order No. 645 of the State Council) published on 4 December 2013.
- 43.
Articles of the Association of the China Association of Enterprises with Foreign Investment, http://caefi.mofcom.gov.cn/article/av/201601/20160101235175.shtml.
- 44.
For example, Article 6 of the Chinese-foreign Equity Joint Ventures Law provided that the employment, dismissal, remuneration, welfare, labor protection, labor insurance and other matters of the employees of joint ventures shall be stipulated through the signing of contracts in accordance with the law. Article 7 stipulates that the employees of a joint venture may establish a trade union organization in accordance with the law to carry out trade union activities and safeguard the legitimate rights and interests of the employees. A joint venture shall provide necessary conditions for the activities of the trade union of the enterprise. Article 12 of the Wholly Foreign-owned Enterprises Law stipulates that a contract shall be signed in the case that wholly foreign-owned enterprises hire Chinese employees in accordance with the law, and the employment, dismissal, remuneration, welfare, labor protection, labor insurance, and other matters shall be clearly stated in the contract. Article 13 stipulates that employees of wholly foreign-owned enterprises may establish trade union organizations in accordance with the law to carry out trade union activities and safeguard the legitimate rights and interests of employees. A wholly foreign-owned enterprise shall provide necessary conditions for the activities of its trade union. Article 13 of the Chinese-foreign Contractual Joint Ventures Law stipulates that the employment, dismissal, remuneration, welfare, labor protection, labor insurance, and other matters of the employees of contractual joint ventures shall be stipulated through the conclusion of a contract in accordance with the law. Article 14 stipulates that the employees of contractual joint ventures may establish trade union organizations in accordance with the law, carry out trade union activities, and safeguard their legitimate rights and interests. The contractual joint venture shall provide the necessary conditions for the activities of the trade union of the enterprise.
- 45.
In this process, the State Council issued the Regulations on Labor Management of Chinese-foreign Equity Joint Ventures on 26 July 1980. The Ministry of Labor and the Ministry of Foreign Economic and Trade Cooperation issued the Measures on Labor Management of Foreign-invested Enterprises on 11 August 1994. However, the Decision of the State Council on Repealing Certain Administrative Regulations Promulgated before the End of 2000, which was issued on 6 October 2001, abolished the Regulations on Labor Management of Chinese-foreign Equity Joint Ventures for its contradiction with the Labor Law. Similarly, the Ministry of Labor and Social Security abolished the Measures on Labor Management of Foreign-invested Enterprises on 9 November 2007 because of its contradiction with the Labor Law.
- 46.
Article 8 of the Chinese-foreign Equity Joint Ventures Law, Article 20 of the Chinese-foreign Contractual Joint Ventures Law, and Article 17 of the Wholly Foreign-owned Enterprise Law.
- 47.
Article 14 of the Wholly Foreign-owned Enterprise Law, Article 15 of the Chinese-foreign Contractual Joint Ventures Law. However, it is noted that due to the limited knowledge at the very early stage of attracting foreign investments, the Chinese-foreign Equity Joint Ventures Law does not make clear provisions on accounting issues.
- 48.
Article 9 of the Chinese-foreign Equity Joint Ventures Law, Article 18 of the Wholly Foreign-owned Enterprises Law and Article 16 of the Chinese-foreign Contractual Joint Ventures Law.
- 49.
Article 11 of the Chinese-foreign Equity Joint Ventures Law, Article 19 of the Wholly Foreign-owned Enterprises Law.
- 50.
22 USC Ch. 46: INTERNATIONAL INVESTMENT AND TRADE IN SERVICES SURVEY.
- 51.
Notice of the Ministry of Commerce on Further Strengthening the Construction of Foreign Investment Information Reporting System and Information Publicity Platform issued on 20 June 2017. China had before implemented the recordation of the establishment and change of foreign-invested enterprises, the joint report system on the annual investment and operation information of foreign-invested enterprises, and establishes the foreign investment information publicity platform.
- 52.
Civil liability arising from foreign investors’ investment behaviors in connection with equity transfer, the effectiveness of equity transfer agreements, and the effectiveness of anonymous shareholding agreements shall be dealt with in accordance with the Company Law and relevant judicial interpretations, particularly, the Interpretations of the Supreme People’s Court on Certain Issues relating to the Application of the Foreign Investment Law, which was adopted on 16 December 2016 and came into force on 1 January 2020.
- 53.
The Foreign Investment Law is not the only law that refers to credit information. Article 15 Paragraph 3 of the Individual Income Tax Law of the People’s Republic of China, which was revised and adopted on 31 August 2018, provides that [t]he relevant departments shall incorporate information on compliance with this Law by taxpayers and withholding agents into the credit information system in accordance with law, and implement joint incentives or sanctions.
- 54.
Article 28 of the MOFCOM’s “Interim Measures for the Administration of the Recordation of the Establishment and Change of Foreign-invested Enterprises” provides: “The relevant staff who abuse their power, neglect their duties, engage in malpractices for personal gains, or solicit or accept bribes in the process of filing or supervision and management, shall be given administrative sanctions in accordance with the law; If a crime is constituted, criminal responsibility shall be investigated in accordance with the law.” Article 31 of the NDRC’s “Measures for Management of Foreign Investment Project Verification and Record-filing” stipulates: “Where the staff of the project verification and record-filing agency abuse their powers, engage in malpractices personal gains in the process of project verification and record-filing, if they constitute a crime, criminal responsibility shall be investigated in accordance with the law; if a crime is not constituted, administrative sanctions shall be given in accordance with the law.” Paragraph 2, Article 60 of the “Provisions on the Registration and Administration of Foreign-invested Partnership Enterprises (2014 Revision) by the State Administration for Industry and Commerce” reads: “If any employee of the enterprise registration authority abuses his power, practices favoritism, accepts bribes, or infringes on the legitimate rights and interests of foreign-invested partnerships, he shall be punished in accordance with the law.”
- 55.
White paper on China and the World Trade Organization, retrieved from http://www.gov.cn/xinwen/2018-06/28/content_5301884.htm.
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Kong, Q. (2023). The Foreign Investment Law: A Commentary. In: China’s Foreign Investment Law Amid Evolving International Investment Rules. Modern China and International Economic Law. Springer, Singapore. https://doi.org/10.1007/978-981-99-2158-4_1
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