Page 32 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
pressure mounted on Beijing to act on long-standing a new pattern of comprehensive opening, the State
complaints from foreign governments and companies Council has proposed a bill,” the Standing Committee
concerning forced technology transfers and other issues. said in a statement (AFP). Beijing has vowed to ensure
Chinese analysts said the new draft was a guarantee for equal treatment and intellectual property protection
multinationals intending to invest in China, but critics said it for overseas firms operating in China, includes a widely
would depend on strongly the law is enforcement (Elmer). anticipated ban on mandatory technology transfers from
foreign companies, and encourages tech cooperation
Beijing announced in November 2018 that China based on voluntary principles and commercial rules
would step up its efforts to ease market restrictions in a bid to tackle a key issue in the ongoing trade
over foreign investment, with measures to open up war with the US, according to the full text of its draft
more sectors and guarantee equal treatment. By the foreign investment law. It also states that China can take
end of March 2019, the government will eliminate all corresponding measures if it encounters discriminatory
limits that go beyond the official negative list for foreign treatment on investment overseas, and foreign
investment and a special inspection will be launched investment that could have an impact on national
to ensure all foreign-funded firms are treated equally in security would be subject to increased scrutiny. The US
areas including government procurement, subsidies and and the EU have stepped up their screening of Chinese
licenses. Provincial authorities have already begun to deals on national security grounds and because of a lack
establish and improve mechanisms to handle complaints of investment reciprocity in China (Wu and Elmer).
from foreign businesses. China also unveiled a string of
policies that the government hopes will improve the While China has frequently denied such accusations,
business environment, including building a level playing it has pledged to improve market access for foreign
field, strengthening intellectual property protection and investors and better protect their rights in the face of
reducing business operation burdens. Xiong Maoping growing complaints and slower foreign investment.
from the State Administration for Market Regulation said The final draft law, with 39 articles, was far shorter than
efforts will be taken to promote more convenient and a version released in 2015, but took a notably stronger
transparent market entry. Xiong predicted that by the line on IP protection. “Official authorities and their staff
end of 2018, the time required for opening a business shall not use administrative means to force the transfer
will be cut to 8.5 days in major cities. Zhou Xiaofei from of technology,” the draft says. That compares with a
the National Development and Reform Commission general statement that foreign firms’ IP rights would be
said the central government will pilot an evaluation protected, in 2015. As trade tension flared going into
system for the business environment in major cities in 2019, there was a growing caution in countries like the
2019 and promote the program nationwide in 2020. The US and Germany about Chinese companies, backed
evaluation system will rank cities in three areas, namely by the state and flush with cash, obtaining advanced
corporate life cycles, attraction to investment and high- foreign technology through aggressive acquisitions
quality development (Xinhua, China to Further). abroad. In an apparent move to emphasize reciprocity,
the draft law said China would reserve the right to
The new law on foreign investment would replace retaliate against countries that discriminate against
three existing laws on joint ventures and wholly owned Chinese investment with “corresponding measures”. The
foreign firms. A draft law on foreign investment has proposed law will likely go through several readings
been submitted to the National People’s Congress (NPC) before being submitted for formal approval; however,
Standing Committee, but could take more than a year to many lawmakers were calling for a prompt deliberation
be signed into law. If adopted, the unified law will replace of the draft to put it to “a vote as soon as possible”.
the laws on Chinese-foreign equity joint ventures, non- Committee member Li Fei suggested it should be put
equity joint ventures (or contractual joint ventures) before the full session of the National People’s Congress
and wholly foreign-owned enterprises (Reuters, China when it convenes its annual session in March. Cai Fang,
Considers). US and EU officials have long complained of another member, suggesting the law may still need
a lack of fair access for foreign companies in China, as more discussion and clarification on “forced technology
well as rampant theft of intellectual property. “In order transfers”. Some law experts and business consultants
to further expand opening up, actively promote foreign remained skeptical about how far the law would
investment, protect the legitimate rights and interests protect foreign firms’ interests, given a lack of rule of
of foreign investment, and promote the formation of law in China. “Laws in China on something like forced
32
pressure mounted on Beijing to act on long-standing a new pattern of comprehensive opening, the State
complaints from foreign governments and companies Council has proposed a bill,” the Standing Committee
concerning forced technology transfers and other issues. said in a statement (AFP). Beijing has vowed to ensure
Chinese analysts said the new draft was a guarantee for equal treatment and intellectual property protection
multinationals intending to invest in China, but critics said it for overseas firms operating in China, includes a widely
would depend on strongly the law is enforcement (Elmer). anticipated ban on mandatory technology transfers from
foreign companies, and encourages tech cooperation
Beijing announced in November 2018 that China based on voluntary principles and commercial rules
would step up its efforts to ease market restrictions in a bid to tackle a key issue in the ongoing trade
over foreign investment, with measures to open up war with the US, according to the full text of its draft
more sectors and guarantee equal treatment. By the foreign investment law. It also states that China can take
end of March 2019, the government will eliminate all corresponding measures if it encounters discriminatory
limits that go beyond the official negative list for foreign treatment on investment overseas, and foreign
investment and a special inspection will be launched investment that could have an impact on national
to ensure all foreign-funded firms are treated equally in security would be subject to increased scrutiny. The US
areas including government procurement, subsidies and and the EU have stepped up their screening of Chinese
licenses. Provincial authorities have already begun to deals on national security grounds and because of a lack
establish and improve mechanisms to handle complaints of investment reciprocity in China (Wu and Elmer).
from foreign businesses. China also unveiled a string of
policies that the government hopes will improve the While China has frequently denied such accusations,
business environment, including building a level playing it has pledged to improve market access for foreign
field, strengthening intellectual property protection and investors and better protect their rights in the face of
reducing business operation burdens. Xiong Maoping growing complaints and slower foreign investment.
from the State Administration for Market Regulation said The final draft law, with 39 articles, was far shorter than
efforts will be taken to promote more convenient and a version released in 2015, but took a notably stronger
transparent market entry. Xiong predicted that by the line on IP protection. “Official authorities and their staff
end of 2018, the time required for opening a business shall not use administrative means to force the transfer
will be cut to 8.5 days in major cities. Zhou Xiaofei from of technology,” the draft says. That compares with a
the National Development and Reform Commission general statement that foreign firms’ IP rights would be
said the central government will pilot an evaluation protected, in 2015. As trade tension flared going into
system for the business environment in major cities in 2019, there was a growing caution in countries like the
2019 and promote the program nationwide in 2020. The US and Germany about Chinese companies, backed
evaluation system will rank cities in three areas, namely by the state and flush with cash, obtaining advanced
corporate life cycles, attraction to investment and high- foreign technology through aggressive acquisitions
quality development (Xinhua, China to Further). abroad. In an apparent move to emphasize reciprocity,
the draft law said China would reserve the right to
The new law on foreign investment would replace retaliate against countries that discriminate against
three existing laws on joint ventures and wholly owned Chinese investment with “corresponding measures”. The
foreign firms. A draft law on foreign investment has proposed law will likely go through several readings
been submitted to the National People’s Congress (NPC) before being submitted for formal approval; however,
Standing Committee, but could take more than a year to many lawmakers were calling for a prompt deliberation
be signed into law. If adopted, the unified law will replace of the draft to put it to “a vote as soon as possible”.
the laws on Chinese-foreign equity joint ventures, non- Committee member Li Fei suggested it should be put
equity joint ventures (or contractual joint ventures) before the full session of the National People’s Congress
and wholly foreign-owned enterprises (Reuters, China when it convenes its annual session in March. Cai Fang,
Considers). US and EU officials have long complained of another member, suggesting the law may still need
a lack of fair access for foreign companies in China, as more discussion and clarification on “forced technology
well as rampant theft of intellectual property. “In order transfers”. Some law experts and business consultants
to further expand opening up, actively promote foreign remained skeptical about how far the law would
investment, protect the legitimate rights and interests protect foreign firms’ interests, given a lack of rule of
of foreign investment, and promote the formation of law in China. “Laws in China on something like forced
32
