New law will lift opening-up to a new level

The new Foreign Investment Law, which will go into effect on Jan 1, 2020, has drawn international attention, as it will have a big impact on the Chinese economy and therefore the global economy. The law shows China's resolution to accord higher priority and greater protection to foreign investment, in order to create a better investment environment for both foreign and domestic enterprises.

In this year's Government Work Report, Premier Li Keqiang has proposed to strengthen supervision, and create a law-based, convenient business environment for foreign investors and enterprises. So China is expected to strengthen the protection of foreign businesses' legal rights, expedite efforts to comply with international trade rules, make its policies more consistent and transparent, and create a fair market environment where domestic and foreign enterprises can compete fairly.

The draft foreign investment law was submitted to the second session of the 13th National People's Congress for review before being passed on March 15. And the new law demonstrates that China is committed to taking opening-up to a new level. It also shows new ideas, approaches and actions will play important roles in deepening reform and opening-up in the new era.

In the 40 years of reform and opening-up, foreign investors and enterprises have made important contributions to China's economic and social development. And they are expected to play a vital role in China's economic development in the future as well.

Data from the Ministry of Commerce show that the actual use of foreign capital last year hit a record high, with 60,533 new foreign-invested enterprises registered, an increase of 69.8 percent year-on-year. In addition to investment, foreign businesses also play an important role in stabilizing the job market by generating employment.

In 2017, it's estimated that foreign-invested enterprises directly employed 45 million people. And with the increase in the number of foreign companies, the number of jobs created will increase too. According to the ministry's statistics, as of 2016, a total of 850,000 foreign-invested enterprises had been established in China with investments of about $1.72 trillion, making the country the top foreign investment destination among developing countries for 24 consecutive years.

Foreign-funded enterprises account for nearly half of China's foreign trade, a quarter of its industrial output, one-fifth of its fiscal revenue and one-seventh of its urban employment. Foreign investors and enterprises not only play an important role in driving China's economy, but also have a big impact across sectors. They have trained a large number of professionals employed in China, helped make skilled workers in various industries more proficient and played a vital role in developing human resources in private enterprises.

The Foreign Investment Law is expected to solve some of the problems faced by the foreign investors and enterprises. The law guarantees "equal position for domestic and foreign investment", reflecting China's commitment to "open its gate wider and wider" to foreign enterprises. The law will also help inject more foreign capital into the Chinese economy, and better protect the intellectual property rights of foreign enterprises.

The new Foreign Investment Law will replace the three existing laws on Chinese-foreign equity joint ventures, wholly foreign-owned enterprises and Chinese-foreign contractual joint ventures that China has implemented during the 40 years of reform and opening-up to regulate foreign-invested entities. Since the changes in foreign enterprises' development in China reflect the changes in the business environment, China is determined to upgrade its regulations to ensure they keep pace with the changing times.

The Foreign Investment Law will remove many barriers for foreign investment and enhance the image of China's open and fair market. This will alleviate international pressure on China, and pave the way for it to play a more active role in the reform of the World Trade Organization and to promote free trade mechanisms such as the Comprehensive and Progressive Trans-Pacific Partnership.

Besides, providing better protection to foreign investors could invite more investments, and lead to more mergers and acquisitions, which in turn will help Chinese companies to not only expand their operations overseas but also create avenues for more Chinese enterprises to "go global".

Foreign capital will continue to play an important role in China's economic development. By aiming to relax market access norms, strengthen supervision, and create a business environment governed by rule of law, China will create a win-win situation for foreign and Chinese investors.

The author is State Council counselor and president of the Center for China and Globalization, a nongovernmental think tank based in Beijing. The views don't necessarily represent those of China Daily.