China Issues Opinions to Support Foreign Investment

On November 7, the State Council issued the Opinions on Further Improving the Use of Foreign Capital (《国务院关于进一步做好利用外资工作的意见》. This Opinions are intended to support the implementation of China’s new Foreign Investment Law and stabilize foreign investments amid intensifying U.S.-China tension.

At a Ministry of Commerce press conference introducing the document, Deputy Director-General of the Ministry of Commerce Wang Shouwen stated that the document aimed at cleaning up existing regulations, provisions and other administrative documents to make sure they are consistent with the Foreign Investment Law, which takes effect on January 1, 2020. The Opinions are not directly binding. Rather, they provide guidance for administrative agencies. Therefore, its implementation will rely on these agencies.

The Opinions outline 20 policy measures covering four aspects: deepening the opening up of foreign investment, promoting investment, facilitating investment, and protecting the legal rights of foreign investors.

First, the Opinions emphasize the protection of the legitimate rights and interests of foreign investment. They states that agencies shall issue licenses to foreign invested companies pursuant to the Foreign Investment Law and other administrative laws, and shall not force technology transfer in the licensing procedure or administrative orders. Other methods of fulfilling implementation of the Foreign Investment Law are establishing and improving the complaint mechanism for foreign-invested enterprises, increasing the transparency of regulatory policies, encouraging foreign-invested enterprises to participate in standard settings in  medical equipment, food and drug, and others, and ensuring equal footing of foreign suppliers in government procurement.

In addition, the Opinions set forth the goal of further opening up, including continuing to shorten the negative lists for foreign investment applicable nationwide and in pilot free trade zones, and removing any investment restrictions beyond the negative list. The Opinions require the removal of all restrictions on the business scope of foreign invested banks, securities companies and mutual fund management companies. For instance, they remove the requirements for total assets and minimum years of operation for foreign insurance brokerage companies, and remove the 51% cap for foreign share in securities companies, mutual fund management companies, futures brokerage companies, and life insurance companies. With regard to the auto industry, the Opinions provide national treatment for new energy vehicles manufactured by foreign invested auto manufacturing companies.

The Opinions also set out several ways to facilitate foreign Investments, including reducing the cost of cross-border money transfer, and optimizing the procedures for land-use approval for foreign investments. The Opinions also ease the rules on visa, work permit, and residence permit for foreigners who visit China.

Moreover, the Opinions outline five efforts to promote investment, including enhancing the construction of a free trade pilot zone, and creating a number of comprehensive bonded zones in the central and western regions.