China’s new Foreign Investment Law and its implementation regulations lay out a blueprint full of promise for international companies. But the lack of detail may present problems, writes Edward Chin
In one of the most important legislative changes in nearly three decades, the China’s central government has finally moved closer to opening its markets to international businesses through the implementation of the Foreign Investment Law (FIL) and the issue of Implementing Regulations of the Foreign Investment Law.
Not only is this a change in law, it represents “a change in mindset and a move away from [the] focus on protecting the weaker local businesses to treating all businesses equally,” says Andrew McGinty, a partner at Hogan Lovells based in Hong Kong. It’s a mindset that says to the global business community that China is open for business.
Notes Fang Jian, a partner at Fangda Partners based in Shanghai: “[The law is] a general relaxation in foreign investment, including in the Chinese market, and lays the foundation for further opening up [of] policies and measures.
“[The FIL] has laid down a new framework for China to regulate foreign investment and has made positive changes to the basic legal system established by the law of foreign-funded enterprises, which means more certainty and freedom of contract for foreign investors to invest in China.”
Some of these changes include: the shift in governance from a board-driven model to a shareholder model; relaxation of the sector-specific foreign investment rules; and the consolidation of the rules governing mergers and acquisitions (M&A) and indirect investment under a single law and regulatory framework.