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0 White Paper on the Business Environment in China
1.4 Interpretation of the Foreign
Investment Law
*Courtesy of Anderson & Anderson LLP
Summary and Significance the Foreign Investment Law through the agency of
the Implementation Regulations.
On March 15, 2019, the Second Session of
the 13th National People’s Congress Section 1. Scope of Entities Subject to the
voted and passed the Foreign Investment Law of the Foreign Invest Law
People’s Republic of China (hereinafter referred to
as the Foreign Investment Law). The new law took The Foreign Investment Law, Article 2 2 defines
effect on January 1, 2020. The Foreign Investment foreign investment. This Article combines the three
Law, together with the first phase of the Trade prior laws on foreign investment by specifying
Agreement (agreed to on December 13, 2019) are forms of foreign investment including, mergers
our most significant agreements aimed to change and acquisitions, direct foreign investment
trade and commercial relationships between projects, four other means of investment, and
China and foreign entities. The Foreign Investment reserves space for extension of the form of foreign
Law will replace the previous three laws on investment. At the same time, in consideration
foreign investment (namely, the Law on Chinese- of the prior restrictions on foreign investment
Foreign Joint Ventures, the Law on Chinese-Foreign in special industries, the Foreign Investment Law,
Cooperative Enterprises and the Law on Foreign- Article 41 also has provisions permitting foreign
owned Enterprises), and become the basic law in the investment in the financial sector, and in the
field of foreign investment. The Foreign Investment management of financial markets.
Law, with a total of six sections and 42 articles,
includes definitions and circumstances of foreign Prior to formal implementation of the Foreign
investment, investment promotion, investment Investment Law, only Chinese enterprises or other
protection and investment management. It may Chinse economic organizations were permitted
be referenced to, or, by comparison, applicable to to invest in foreign enterprises, but Chinese
Hong Kong, Macao and Taiwan investments. natural persons were not allowed to establish
On November 1, 2019, the Ministry of Justice 2 Article 2 of the Foreign Investment Law reads “This Law applies
published the Regulations on the Implementation to foreign investment within the mainland territory of the People’s
of the Foreign Investment Law of the People’s Republic Republic of China (hereinafter, Mainland China).
of China1 (Draft for Solicitation of Opinions) The term ‘foreign investment’ used in this Law refers to the invest-
(hereinafter, the Implementation Regulations), ment activities in Mainland China conducted directly or indirectly
further refining the Foreign Investment Law. This by natural persons, enterprises, or other organizations of foreign
article will provide a preliminary interpretation of countries (hereinafter, foreign investors), including the following
circumstances:
1This article assumes that the Implementation Regulations will (1) Where foreign investors individually or jointly with other inves-
eventually be promulgated in the present draft form, however, this tors establish foreign-invested enterprises in mainland China;
may not be the case and there may be changed in the Implemen- (2) Where foreign investors acquire stock shares, stock equity,
property shares, or other similar rights and interests in mainland
tation Regulation prior to formal promulgation. Chinese enterprises;
(3) Where foreign investors individually or jointly with other inves-
tors invest in new projects in mainland China;
(4) Other methods of investment as prescribed by laws, adminis-
trative regulations, or the State Council.
The term ‘foreign-invested enterprises’ used in this Law refers to
enterprises that, in accordance with Chinese law, are established
in mainland China after being registered and that are wholly or
partially invested by foreign investors.”
76
1.4 Interpretation of the Foreign
Investment Law
*Courtesy of Anderson & Anderson LLP
Summary and Significance the Foreign Investment Law through the agency of
the Implementation Regulations.
On March 15, 2019, the Second Session of
the 13th National People’s Congress Section 1. Scope of Entities Subject to the
voted and passed the Foreign Investment Law of the Foreign Invest Law
People’s Republic of China (hereinafter referred to
as the Foreign Investment Law). The new law took The Foreign Investment Law, Article 2 2 defines
effect on January 1, 2020. The Foreign Investment foreign investment. This Article combines the three
Law, together with the first phase of the Trade prior laws on foreign investment by specifying
Agreement (agreed to on December 13, 2019) are forms of foreign investment including, mergers
our most significant agreements aimed to change and acquisitions, direct foreign investment
trade and commercial relationships between projects, four other means of investment, and
China and foreign entities. The Foreign Investment reserves space for extension of the form of foreign
Law will replace the previous three laws on investment. At the same time, in consideration
foreign investment (namely, the Law on Chinese- of the prior restrictions on foreign investment
Foreign Joint Ventures, the Law on Chinese-Foreign in special industries, the Foreign Investment Law,
Cooperative Enterprises and the Law on Foreign- Article 41 also has provisions permitting foreign
owned Enterprises), and become the basic law in the investment in the financial sector, and in the
field of foreign investment. The Foreign Investment management of financial markets.
Law, with a total of six sections and 42 articles,
includes definitions and circumstances of foreign Prior to formal implementation of the Foreign
investment, investment promotion, investment Investment Law, only Chinese enterprises or other
protection and investment management. It may Chinse economic organizations were permitted
be referenced to, or, by comparison, applicable to to invest in foreign enterprises, but Chinese
Hong Kong, Macao and Taiwan investments. natural persons were not allowed to establish
On November 1, 2019, the Ministry of Justice 2 Article 2 of the Foreign Investment Law reads “This Law applies
published the Regulations on the Implementation to foreign investment within the mainland territory of the People’s
of the Foreign Investment Law of the People’s Republic Republic of China (hereinafter, Mainland China).
of China1 (Draft for Solicitation of Opinions) The term ‘foreign investment’ used in this Law refers to the invest-
(hereinafter, the Implementation Regulations), ment activities in Mainland China conducted directly or indirectly
further refining the Foreign Investment Law. This by natural persons, enterprises, or other organizations of foreign
article will provide a preliminary interpretation of countries (hereinafter, foreign investors), including the following
circumstances:
1This article assumes that the Implementation Regulations will (1) Where foreign investors individually or jointly with other inves-
eventually be promulgated in the present draft form, however, this tors establish foreign-invested enterprises in mainland China;
may not be the case and there may be changed in the Implemen- (2) Where foreign investors acquire stock shares, stock equity,
property shares, or other similar rights and interests in mainland
tation Regulation prior to formal promulgation. Chinese enterprises;
(3) Where foreign investors individually or jointly with other inves-
tors invest in new projects in mainland China;
(4) Other methods of investment as prescribed by laws, adminis-
trative regulations, or the State Council.
The term ‘foreign-invested enterprises’ used in this Law refers to
enterprises that, in accordance with Chinese law, are established
in mainland China after being registered and that are wholly or
partially invested by foreign investors.”
76
