China says new foreign investment law to foster ‘fair competition’

BEIJING (Reuters) – China’s new foreign investment law will help foster “fair competition” and create a transparent environment for foreign firms, a Chinese parliament official said on Friday, as China and the United States work to resolve a bitter trade dispute.

The law has been fast-tracked for approval at the full session of parliament this month.

The law will replace existing regulations for joint ventures and wholly foreign-owned enterprises and is designed to ease foreign concerns about China’s investment environment.

It will ban forced technology transfer and illegal government “interference” in foreign business practices, according to the latest draft.

Wang Chen, vice chairman of parliament’s standing committee, told a full session of the legislature that the law “includes many stipulations that ensure domestic and foreign enterprises are subject to a unified set of rules and compete on a level playing field”.

It will “create a stable, transparent and predictable market environment featuring fair competition”, he added.

The law also demonstrates China’s commitment to using reform and innovation to ensure its foreign investment legal system develops and improves, Wang said.

The improvement of the investment environment will help the country attract greater foreign investment, he added.

“The state shall protect the intellectual property rights of foreign investors and foreign-invested enterprises, and encourage technological cooperation based on the principle of voluntariness and commercial norms.”

Some law experts and business consultants have expressed scepticism about how far the law would protect foreign firms’ interests, given a lack of rule of law in China.

The European Union Chamber of Commerce in China said in a statement late last month, shortly before parliament opened, that it appreciated the aim of trying to address foreign businesses’ concerns, but that problems remained.

Those include broad terms and vague language that require clarification, with many of its articles reading more like policy commitments than legally binding clauses.

“We are concerned that the drafting of the Foreign Investment Law is being squeezed between the normal legislative process and the negotiation table with the U.S., in part to address the trade conflict,” said chamber president Mats Harborn.

“This law will have major ramifications for all foreign companies in China for the foreseeable future, so the drafting process must be given the time and attention due to such an important piece of legislation, and proper consultation periods should be respected.”

The law will be passed at the close of parliament on March 15. The legislature is packed with people chosen for their loyalty to the ruling Communist Party, meaning it will not be rejected.

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