Page 7 - THE SOUTH CHINA BUSINESS JOURNAL
P. 7
November 1, 2019 the Ministry of Justice, regulations intend to accelerate market opening
Ministry of Commerce, and the National reforms, level the playing field for foreign and
Development and Reform Commission released domestic firms, and eliminate inconsistencies in the
the Draft Regulations on the Implementation of enforcement of laws.
Foreign Investment of the People’s Republic of
China for public consultation. However, some observers criticize the FIL’s vague
wording and question its promised effect. Other
The draft implementation regulations are a observers are more optimistic and see in the vague
highly anticipated document that many hope will wording a “new paradigm for modern FIEs where
provide clarity on the new measures introduced FIEs are no longer micro-managed on every aspect of
by the Foreign Investment Law (FIL) – set to take how they are run.”
effect January 1, 2020.
As it stands, the draft implementation regulations
On paper, this new FIL, and its corresponding are comprised of five chapters and 45 articles
draft implementation regulations mark one of and address various issues ranging from forced
the most significant developments in China’s technology transfer to protection of trade secrets.
treatment of foreign investment. The new
The draft was first released to foreign business
associations, including the US-China Business
Council and EU Chamber, but has now been released
to the public for further comment.
What do the draft implementation
regulations say?
The three fundamental themes in the draft are:
investment promotion, investment protection, and
investment management.
Many of the common concerns long-expressed by
foreign investors in China are addressed within the
provisions of the draft, such as forced technology
transfers, profit repatriation, and trade secrets. Some
of the key issues include:
• Allowing, capital gains, royalties, and IP license
fees gained by foreign investors and foreign
employees to be freely remitted in RMB or foreign
exchange in accordance with the law and after
paying tax (Article 23);
• Establishing punitive damages systems for the
infringement of IP rights (Article 24);
• Limiting the extent, scope, and exposure of
material concerning a foreign business’ ‘trade
secrets’ that will be required to be handed over to
administrative bodies, and protecting the internal
management system to protect this information
(Article 26); and
• Government officials cannot force or induce
foreign investors to transfer technology either
directly or using indirect methods described in the
draft (Article 25).
South China Business Journal 4
Ministry of Commerce, and the National reforms, level the playing field for foreign and
Development and Reform Commission released domestic firms, and eliminate inconsistencies in the
the Draft Regulations on the Implementation of enforcement of laws.
Foreign Investment of the People’s Republic of
China for public consultation. However, some observers criticize the FIL’s vague
wording and question its promised effect. Other
The draft implementation regulations are a observers are more optimistic and see in the vague
highly anticipated document that many hope will wording a “new paradigm for modern FIEs where
provide clarity on the new measures introduced FIEs are no longer micro-managed on every aspect of
by the Foreign Investment Law (FIL) – set to take how they are run.”
effect January 1, 2020.
As it stands, the draft implementation regulations
On paper, this new FIL, and its corresponding are comprised of five chapters and 45 articles
draft implementation regulations mark one of and address various issues ranging from forced
the most significant developments in China’s technology transfer to protection of trade secrets.
treatment of foreign investment. The new
The draft was first released to foreign business
associations, including the US-China Business
Council and EU Chamber, but has now been released
to the public for further comment.
What do the draft implementation
regulations say?
The three fundamental themes in the draft are:
investment promotion, investment protection, and
investment management.
Many of the common concerns long-expressed by
foreign investors in China are addressed within the
provisions of the draft, such as forced technology
transfers, profit repatriation, and trade secrets. Some
of the key issues include:
• Allowing, capital gains, royalties, and IP license
fees gained by foreign investors and foreign
employees to be freely remitted in RMB or foreign
exchange in accordance with the law and after
paying tax (Article 23);
• Establishing punitive damages systems for the
infringement of IP rights (Article 24);
• Limiting the extent, scope, and exposure of
material concerning a foreign business’ ‘trade
secrets’ that will be required to be handed over to
administrative bodies, and protecting the internal
management system to protect this information
(Article 26); and
• Government officials cannot force or induce
foreign investors to transfer technology either
directly or using indirect methods described in the
draft (Article 25).
South China Business Journal 4
