China's Draft Foreign Investment Law nears approval

China's economy stands to benefit from more foreign investment and a new draft law about this issue is on its way for review. The latest draft of China's Foreign Investment Law now heads to the upcoming plenary session of the National People's Congress on March 5. The decision was made by the NPC Standing Committee Wednesday at the closing meeting of its two-day session. The first draft came last month, but since that time, some lawmakers have expressed concerns. 

"The 'pre-establishment national treatment' is intended to give equal treatment to foreign and domestic investors. But several clauses in the draft give foreign investors better treatment than domestic ones, we should consider this well," says Yu Zhigang, member of the NPC Standing Committee.  

The draft law highlights equal treatment for foreign investors and forbids forced technology transfers on foreign businesses. The updated draft proposes using the same contents prescribed in the Company Law and the Partnership Enterprise Law to regulate the form and structure of foreign-invested enterprises. 

Committee member Zhang Sujun concerns about companies already established under current laws. "If this draft is approved, current laws in the area will be abolished, and existing foreign-invested companies will be asked to change their forms for Company law and Partnership laws within five years. Can we change the clause to let them maintain their original forms within their approval period or contract period?"

As of last October, China is home to 950,000 foreign-funded companies, which bring in over 2.1 trillion U.S. dollars in investment. The new law is expected to make the country's foreign investment environment more open, fair and more transparent. 

The draft law has only 41 clauses, but it will be a milestone for China's deeper opening-up and could bring a lot of changes ahead. It's still open for public comments until February 24, before the final approval likely in March. Lawmakers are also calling for practical regulations to follow suit immediately.