Landmark law boosts China's appeal for foreign investors

Legal protections make nation more attractive place to conduct business, spur commerce

BEIJING — Since the outbreak of the COVID-19 pandemic some three years ago, the confidence of global investors has been dented by mounting uncertainties. However, China has remained a strong magnet for global investors over the past three years, with the country's landmark Foreign Investment Law offering a powerful guarantee for law-based opening-up.

On Jan 1, 2020, the world's second-largest economy enforced the milestone law, which includes a comprehensive and fundamental set of legal standards for foreign investors and aims to better protect their rights and interests. With the law in effect for three years now, the growing appeal of the Chinese market can be seen in the clear signs of foreign capital inflows.

Foreign direct investment into the Chinese mainland, in actual use, totaled 999.98 billion yuan ($147.6 billion) in 2020 and jumped to 1.15 trillion yuan in 2021, said the Ministry of Commerce.

In the first 11 months of 2022, FDI inflow expanded 9.9 percent year-on-year to nearly 1.156 trillion yuan, guaranteeing that China would secure a record FDI inflow for another year.

"The Foreign Investment Law ensures China's investment environment and foreign investment system in legal form and plays an important role in stabilizing the confidence of multinational companies in China, as the world faces slower economic growth and surging inflation," said Zhao Beiwen, deputy director of the Institute of World Economy under the Shanghai Academy of Social Sciences.

Better legal protection

With unified provisions for the entry, promotion, protection and management of foreign investment, China's Foreign Investment Law addresses foreign firms' concerns and provides facilitation and ease for foreign investment.

China has stressed a level playing field for domestic and foreign companies, banned forced technology transfers and improved the mechanism for foreign-invested firms to file complaints, according to the law and its implementing regulations.

Hence, foreign-invested enterprises continue to expand their footprint in China, with an average of 43,000 foreign-invested enterprises newly established each year in 2020 and 2021, according to the MOC.

As of the end of September 2022, a total of 455,000 foreign enterprises were registered, and more than 2,000 regional headquarters and research and development centers of multinational companies had been set up in China, the ministry said.

In November last year, Schneider Electric set up its fifth-largest research institute in China.

"China's economy is bursting with new growth vitality and posts huge market potential," said Yin Zheng, executive vice-president of Schneider Electric and president of Schneider Electric China.

"Foreign enterprises, especially high-tech foreign-invested enterprises, pay more attention to intellectual property protection than labor-intensive ones. The Foreign Investment Law has ensured a fair competition environment with rules and transparency," Zhao said, adding that the protection of intellectual property rights has boosted China's attractiveness for foreign capital inflow.

From January to November 2022, FDI in high-tech manufacturing surged 58.8 percent from the same period of the previous year, while that in the high-tech service sector rose 23.5 percent year-on-year, the MOC added.