2020 Update: New Gov Policies Will Further Simplify Foreign Investment in China
With more and more foreign capital injecting in the country, the People’s Republic of China is moving to a newer “case by case examination and approval system” to monitor non-Chinese investment in the country.
According to the regulatory bodies, there were defects in the older system that had to be removed. There have been significant changes in international trade laws that affect China’s internal affairs. Moreover, the country must improve to control the incoming foreign capital and develop an economic system that would work.
The implementation of [newer] foreign investment reforms and its supporting regulations [will ensure] a stable process to supervise China’s [foreign] investment activities.
Better Reforms, Simpler Procedures
In recent years, China’s regulation has been gradually optimizing the process to examine and approve foreign investment in the country. Since foreign companies and capital make up a significant portion of China’s economy, the government decided to make the entire procedure easier.
Based on reports from the Qingdao Summit, almost 961,000 foreign enterprises have been registered in China ever since the country opened doors to the world 40 years ago. China’s economic growth has lowered year-on-year recently, however, the country is still growing faster than any other economy in the world.
To ensure its success, it needs to make sure it provides a competitive environment for foreign investment. According to the 2017-2018 Global Investment Competitiveness Report, foreign investors – who take local policies very seriously – the most important factors for them while investing in an economy include political stability, social security, and the stability of the legal jurisdiction.
In order to attract executives from multinational companies, China has improved its legal system and based on the results so far, it seems like the new policies are working. The country is the largest economic hub and attracts huge sums in foreign capital.
Tesla, FESTO, ExxonMobil, & Others Make Way
According to the Ministry of Commerce, more than 1300 large projects worth $50 million each have been initiated in China – this is an increase of 5.4% as compared to previous years. The projects are owned by some of the largest companies in the world including BASF, ExxonMobil, Tesla, and others.
However, there are still certain areas such as direct education, telecommunication, banking, and other state-controlled industries where foreigners cannot invest. In other areas, foreigners are still given complete support and fair treatment. According to the ministry,
Foreign investment law and all regulatory bodies [related to it] actively respond to the concerns and demands of foreign investors.
This is a great indication that there are likely to be further changes in the future in favor of foreign investment and company formation in China.
What About Intellectual Properties?
The new changes also enforce better intellectual property rights for foreign enterprises in the country.
Intellectual properties in China have always been a gray area that has been left unoptimized in the past. However, to ensure competition, the government has put better intellectual property practices to ensure all companies have a fair chance to market their products in the country.
For instance, Article 23 of the new reforms states that the trade secrets of a foreign enterprise must be kept confidential by any staff, executives, or directors working in the organization. Any unapproved disclosures will be against the law.
The country is migrating from an older system to a newer one. According to reports, the government has advised a five-year-long transition period to make sure the system matures and brings in more foreign capital.
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Via ChinaDaily