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China Passes New Foreign Investment Law

April 2019 - Corporate & Commercial. Legal Developments by V&T Law Firm.

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China Passes New Foreign Investment Law

April 15, 2019

Foreign investment; cross-border transactions

China’s new Foreign Investment Law (2019 FIL) changes how foreign investment is regulated in China. The National People’s Congress (NPC) of the People’s Republic of China (PRC) passed this new law on March 15, 2019. It had been published in draft form (2018 Draft Law) on December 26, 2018, and it will take effect on January 1, 2020.[1]

The Chinese authorities rarely finalize a draft law this quickly. The 2019 FIL was passed only three months after the 2018 Draft Law was published.[2] The 2019 FIL promises to further open China’s market to foreign investment and protect the rights of foreign investors. The Chinese government might also be responding to pressure applied by United States negotiators during recent trade talks.

Four years ago, an earlier Draft Foreign Investment Law (2015 Draft Law) was published for public comment. This draft law contained about four times as many provisions as the 2019 FIL, and it contained many details needed to implement the law, but it was never enacted. Because of its brevity, the 2019 FIL can be considered a guideline that will require substantial implementing legislation.

In any event, the 2019 FIL has added some provisions to the 2018 Draft Law and has revised others. This V&T Alert is an overview of the major revisions made to the 2018 Draft Law and it examines many facets of the new regulatory regime.

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[1] The terms “PRC” and “China” are used interchangeably in this client alert and neither includes Hong Kong, Macau, or Taiwan.

[2]A V&T client alert regarding the 2018 Draft Law is available: here.