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The Legal System for Foreign Investment

Overview

· INSIGHTS

China encourages foreign investors to invest in China in accordance with the law. China also protects the legitimate rights and interests of foreign investors and foreign-invested enterprises in accordance with the law. China has always followed the rule of law in utilizing foreign investment. In the early stage of reform and opening up, China successively formulated the Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures, Law of the People's Republic of China on Wholly Foreign-owned Enterprises, and the Law of the people’s Republic of China on Chinese-Foreign Contractual Joint Ventures (collectively referred to as the “Three Laws on Foreign Investment”), laying a legal foundation for China to attract foreign investment. Since then, in order to meet the needs of foreign capital use, China has continuously established and improved its legal system for foreign investment. This has helped to shore up the confidence of foreign investors and improvement of the investment environment.

On March 15, 2019, the Foreign Investment Law of the People's Republic of China (hereinafter referred to as the “Foreign Investment Law”) was approved at the Second Session of the 13th National People's Congress, replacing the “Three Laws on Foreign Investment” as the new fundamental law on foreign investment in China. The Foreign Investment Law sets a basic framework for China's new legal system for foreign investment, affirms that the "pre-establishment national treatment plus a negative list" management system is to be implemented for foreign investment, and further strengthens investment promotion and protection. In December of the same year, the State Council issued the Implementing Regulation for the Foreign Investment Law of the People's Republic of China (hereinafter referred to as the “Implementing Regulations”), detailing the main legal systems defined by the Foreign Investment Law. The Foreign Investment Law and its Implementing Regulations came into effect on January 1, 2020. Foreign investment will henceforth enjoy a market environment with higher stability, transparency, predictability, and fairer competition.

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