ElsushkoLawyers - Frequently Asked Questions (FAQ) - Cooperation with China
What is new in the Foreign Investment Negative List 2020?
The new Special Administrative Measures for Foreign Investment Access (Foreign Investment Negative List) entered into effect on the 23d of July, 2020.
The Foreign Investment Negative List 2020 has reduced the number of industries from 40 to 33 compared to its 2019 edition.
One of the new features of the Foreign Investment Negative List 2020 is as follows. In addition to special purpose vehicles, new energy vehicles and commercial vehicles, the proportion of Chinese shares in vehicle manufacturing shall not be less than 50%. The same foreign investor may establish two or less joint ventures in China to produce similar vehicle products.
In 2022, the restrictions to the share ratio of foreign investors in passenger car manufacturing and restrictions on the same foreign investor establishing two or less joint ventures in China to produce similar vehicle products will be abolished.
The Foreign Investment Negative List 2020 has reduced the number of industries from 40 to 33 compared to its 2019 edition.
One of the new features of the Foreign Investment Negative List 2020 is as follows. In addition to special purpose vehicles, new energy vehicles and commercial vehicles, the proportion of Chinese shares in vehicle manufacturing shall not be less than 50%. The same foreign investor may establish two or less joint ventures in China to produce similar vehicle products.
In 2022, the restrictions to the share ratio of foreign investors in passenger car manufacturing and restrictions on the same foreign investor establishing two or less joint ventures in China to produce similar vehicle products will be abolished.
Date: 17 June 2021
What does a Negative List for foreign investment in China mean?
A Negative List refers to special administrative measures for the access of foreign investment in certain industries or areas in China.
It provides clear guidelines for governments at all levels and relevant departments to examine, and determine which foreign investment in China can enter the Chinese market, which investment can selectively enter and which investment cannot enter the Chinese market.
It provides clear guidelines for governments at all levels and relevant departments to examine, and determine which foreign investment in China can enter the Chinese market, which investment can selectively enter and which investment cannot enter the Chinese market.
This system of national treatment will take place before any foreign investor can access the Chinese market and is currently the management system of foreign investment in China.
New editions of the Foreign Investment Negative List and the Negative List for Foreign Investment Access in Pilot Free Trade Zones went into effect on the 23d of July, 2020.
The negative list management system after the implementation of the Foreign Investment Law, has further consolidated the important measures of comprehensively opening up foreign investment with a wider range, wider fields and deeper levels, and will further improve the foreign investment environment and promote high-quality development of China's economy with a higher level of openness.
Date: 8 June 2021
What are the four main features of China's new Foreign Investment Law?
The draft of China’s new Foreign Investment Law of China was published by China's Ministry of Commerce (Ministry of Commerce of the People's Republic of China-MOFCOM) on 19 January, 2015. It was open for public comment until 17 February 2015. On March 15, 2019, the Law of China on Foreign Investment came into force.
This Law introduced changes in the regulations of foreign investment in China.
- The new Law eliminates the effect of a separate regime of regulation of foreign investment in China. Thus, foreign investors will no longer be subject to a separate regulatory regime from Chinese investors. Prior to the entry into force of this Law, China had separate legislation to regulate foreign activities.
- The new reporting system will replace the prior system of individual approval of foreign investments by the Ministry of Commerce of the People's Republic of China.
- The Foreign Investment Law will expand the list of circumstances under which national security can be monitored to cover any foreign investment that is or may be detrimental to China's national security.
- "Grandfather clause"* (Grandfathering)1 stays valid, but foreign or sino-foreign companies need to provide evidence that their activities comply with the Law of China "On Companies", the Partnership law or the Law on Individual Proprietorship Enterprises within 3 years.
*"Grandfather clause" (Grandfathering Clause) is the principle of investor protection against changes in the legislation of the host country.
Date: 24 May 2021
What should foreign investors encounter when investing in China?
Foreign investors and enterprises with foreign investment in China shall abide by China's laws and regulations, shall not endanger China's national security or social and public interests, shall abide by China's laws and regulations on laboUr protection and social insurance; handle tax, accounting, foreign exchange and other matters, and shall be subject to supervision and inspection by relevant competent departments according to law.
Foreign investors who violate the provisions of the negative list of investment access, shall be dealt with in accordance with the law and be subject to corresponding legal liabilities. Violations of laws and regulations by foreign businessmen shall be investigated and dealt with by the relevant departments in accordance with the law.
Foreign investors who violate the provisions of the negative list of investment access, shall be dealt with in accordance with the law and be subject to corresponding legal liabilities. Violations of laws and regulations by foreign businessmen shall be investigated and dealt with by the relevant departments in accordance with the law.
Date: 24 May 2021
Should administrative organs in China and their staff keep confidentiality?
In the process of foreign investment, the conditions for technical cooperation shall be determined by all parties to the investment through equal consultation in accordance with the principle of fairness, and no administrative organ or their employees shall force the transfer of technology.
Administrative organs and their employees shall keep confidentiality of trade secrets divulged to them in the course of performing their duties.
Administrative organs and their employees shall keep confidentiality of trade secrets divulged to them in the course of performing their duties.
Date: 24 May 2021