China's foreign investment law to be gladly welcomed -- US expert

NEW YORK - China's newly passed foreign investment law will help level the playing field and be gladly welcomed by foreign investors, said a senior US expert. "The predictability, transparency, and non-discrimination bent of the law will improve the business environment," Sourabh Gupta, a senior fellow at the Washington-based Institute for China-America Studies, told Xinhua in a recent interview.

"In my view, (the law will) draw a deluge of foreign capital into the Chinese investment marketplace over the next decade," Gupta said. China's national legislature on Friday passed the foreign investment law, a landmark legislation that will provide stronger protection and a better business environment for overseas investors. It aims to improve the transparency of foreign investment policies and ensure that foreign-invested enterprises participate in market competition on an equal basis.

Level playing field

The law will significantly help address major issues that foreign investors face in China, as it provides them with strong protection to ensure administrative and regulatory impartiality, according to the scholar.

"Foreign investors will now be able to compete on the same terms as China's domestic companies," he said, adding that a number of key sectors have gone through significant liberalization for foreign direct investment, such as automobile, finance and insurance.

In this aspect, the expert pointed out that China's national treatment "will afford foreign investors treatment that is no less favorable than that afforded to Chinese investors during the establishment, acquisition, expansion and other stages of their investment."

He also noticed that the legislation explicitly prohibits forced technology transfer by administrative measures and essentially bars local governments from interfering with national foreign investment policies. Therefore, the investment protection clauses in the law will be "gladly welcomed by foreign businesses," he noted.

The scholar also pointed out that the law's significance for China's new round of opening-up and reform is "potentially profound," as it embodies its potential to assist in transforming Chinese economy towards "a more sophisticated, advanced economy-type, (and a) productivity-led growth model."

Implementation is key

The law is scheduled to take effect on Jan 1, 2020, yet it will take some time for the law to reassure foreign businesses that "the playing field is being leveled in China to allow fair competition to take hold, irrespective of national origins," Gupta said.

As always, when a piece of legislation is passed, the key is in the implementation, he noted, adding that how rigorously the implementing regulations are written will be key to the success of the enforcement.

In this regard, the senior fellow expressed optimism, as he has witnessed rapid strides that China has made "in the enforcement-related elements of its patents and intellectual property rights (IPR) regime."

Particularly, he pointed to the newly established IPR court by China's Supreme People's Court (SPC), which has started to hear IPR appeals since Jan 1. IPR cases to be handled by the court include a broad range of lawsuits, such as patents, copyright, trademarks, new plant varieties, integrated circuit layout design and monopoly, according to the SPC.

In terms of foreign investment protection, "strong measures to deal with political, regulatory and administrative non-compliance are envisaged. A robust working mechanism to promptly address foreign businesses' complaints is also envisaged," he said.

Since foreign investors will wonder "what really has changed de facto on the ground" in terms of the enforcement of the foreign investment law, "the burden of proof thus resides on China's shoulder to show that a new chapter has been opened in regard to fair, predictable, transparent and non-discrimination enforcement of China's foreign investment regime."

"The implementing regulations that breathe life into the foreign investment law will be crucial in this regard," Gupta stressed.