Published: Mon, March 18, 2019
Global News | By Blake Casey

Chinese Parliament approves foreign investment law to ease global concerns

Chinese Parliament approves foreign investment law to ease global concerns

It says the law, which was passed Friday, includes better safeguards for intellectual property and an end to the practice of forcing global firms to hand over critical technology to their Chinese partners.

China will cut value-added tax rates for manufacturing and other basic sectors, as well as for small and medium-sized companies, the largest providers of jobs in the country.

China's top trade negotiator, Liu He, held phone talks with US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer, with the official Xinhua news agency saying they made "substantial progress".

The new law will take effect on 1 January 2020.

US President Donald Trump is demanding China to reduce the United States dollars 375 billion trade deficit, provide legal protection for intellectual property rights (IPR), technology transfer and more access to American goods to Chinese markets.

It was introduced and passed by the congress three months after the first draft was presented - a rapid journey for a new law in China, giving rise to the belief that it was indeed tied to ongoing trade negotiations with the US.

The newly signed Foreign Investment Law will only help to accelerate this process as worldwide investors and companies develop their Chinese deal-making experience'. Just like how business groups are concerned over how the trade talks roll out between President Xi Jinping and US President Donald Trump, they are also anxious about the new foreign investment law.

"Its vague wording further adds to the legal uncertainty that the law creates for foreign companies", the European Chamber said.

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"I have said many times that China's opening-up measures are often not launched as one package; they come out every year and even every quarter", Li said. It expressed concern about the broad scope of "national security reviews" allowed by the law and the impact of regulations on individual industries.

Businesses are still concerned that industry-specific laws and local administrative approvals may impede full market access despite provisions in the negative list.

The American Chamber of Commerce in China, which represents about 900 U.S. companies, said this week that the law was being pushed through without "extensive consultation and input" from foreign businesses in the country.

Both the European Union and American trade chambers had urged China to consider having a single Company Law to govern both foreign and domestic enterprises, as is common in many countries.

China's number two leader yesterday denied Beijing tells its companies to spy overseas, refuting United States warnings that Chinese technology suppliers might be a security risk.

The changes were widely seen within the US business community as an effort, in part, by Beijing to address on paper some complaints underlying the bitter US-China trade dispute.

In October 2017, the Communist Party held its twice-a-decade congress, where it amended its constitution to enshrine Xi's political "thought" with his name in order to make his status comparable to Mao Zedong, founder of the People's Republic of China.

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