Foreign Investment Law of the People's Republic of China (Draft)

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The 7th Session of the Standing Committee of the 13th National People's Congress has conducted deliberations over the "P.R.C. Foreign Investment Law (Draft)." The "P.R.C. Foreign Investment Law (Draft)" is hereby published on the National People's Congress's website, and the public can directly visit the website (www.npc.gov.cn) to submit comments and can also mail comments to the Legislative Affairs Commission of the NPC Standing Committee (No. 1 West Qianmen Avenue, Xicheng District, Beijing 10085. Please clearly write "外商投资法草案征求意见" on the envelope). The deadline for submitting comments: February 24, 2019.

Foreign Investment Law of the People's Republic of China (Draft)

Chapter I: General Provisions

Article 1: This Law is formulated to further expand the scope of opening-up, to actively promote foreign investment, to protect the lawful rights and interests of foreign investment, to make new grounds in opening up on all fronts, and to promote the healthy development of the socialist market economy.

Article 2: This Law applies to foreign investment within the mainland territory of the People's Republic of China (hereinafter referred to as mainland China).

"Foreign investment" as used in this Law refers to the investment activities in mainland China conducted directly or indirectly by natural persons, enterprises, or other organizations of foreign countries (hereinafter referred to as foreign investors), including the following circumstances:

(1) Where foreign investors individually or jointly with other investors invest in new projects, establish foreign-invested enterprises, or increase investment in mainland China;

(2) Where foreign investors acquire stock shares, stock equity, property shares, or other similar rights and interests in mainland Chinese enterprises through mergers or acquisitions;

(3) Where foreign investors invest in mainland China through other means prescribed by laws, administrative regulations, or the State Council.

"Foreign-invested enterprises" as 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.

Article 3: The State adheres to the basic state policy of opening up, encourages foreign investors to invest in mainland China in accordance with law, and elevates the quality and level of making us of foreign investment.

The State implements the policy of liberalizing and facilitating investment at a high level, establishes and improves mechanisms for promoting foreign investment, and builds a stable, transparent, and predictable investment environment.

Article 4: The State implements the management scheme of pre-establishment national treatment plus negative list with respect to foreign investment; where the international treaties or agreements that the People's Republic of China concludes or joins have separate provisions for the treatment of foreign investors, follow those provisions.

"Negative list" as used in the previous paragraph refers to the special administrative measures on access that are implemented in certain fields for foreign investment as prescribed by the State. The negative list is to be published by or published as authorized by the State Council.

Article 5: The State protects the investment, proceeds, and other lawful rights and interests of foreign investors in mainland China according to law.

Article 6: Foreign investors and foreign-invested enterprises shall abide by Chinese laws and regulations and must not endanger China's national security or harm the public interests.

Article 7: The competent departments for commerce and investment under the State Council are to carry out work on promoting, protecting, and managing foreign investment according to their division of duties; the relevant departments under the State Council are to be responsible for the relevant work on promoting, protecting, and managing foreign investment within the scope of their respective duties.

The relevant departments of the local people's governments at or above the county level are to carry out the promotion, protection, and management of foreign investment in accordance with laws and regulations and the division of duties determined by the people's government at the same level.

Article 8: The employees of foreign-invested enterprises are to establish labor union organizations in accordance with law to carry out labor union activities and to protect the employees' lawful rights and interests. Foreign-invested enterprises are to provide the necessary conditions for the activities of their respective labor unions.

Chapter II: Investment Promotion

Article 9: Except as otherwise provided by laws or administrative regulations, the State's various policies that promote the development of enterprises equally apply to foreign-invested enterprises.

Article 10: In the formulation of laws, regulations, or rules related to foreign investment, the opinions and suggestions of foreign-invested enterprises shall be heard.

Normative documents or judicial rulings that are related to foreign investment shall be promptly published in accordance with law.

Article 11: The State establishes and improves the foreign investment service system and provides counseling and service for foreign investors and foreign-invested enterprises about laws and regulations, policy measures, project information, and such other areas.

Article 12: The State establishes multilateral or bilateral cooperation mechanisms on investment promotion with other countries and regions or international organizations and strengthens international communication and cooperation in the field of investment.

Article 13: Based on the needs of opening up, the State implements experimental policy measures on foreign investment in specific regions to promote foreign investment.

The State Council may establish special economic zones to promote foreign investment and expand the scope of opening-up.

Article 14: Based on the needs of national economic and social development, the State takes preferential measures to encourage and guide foreign investors to invest in certain industries, fields, or regions.

Article 15: Foreign-invested enterprises are to equally participate in standardization work, and the formulation of standards are to strengthen information disclosure and public oversight.

Compulsory standards formulated by the State are to be applied equally to foreign-invested enterprises.

Article 16: The State safeguards foreign-invested enterprises' fair participation in government procurement activities. In accordance with law, government procurement gives equal treatment to products manufactured by foreign-invested enterprises in mainland China

Article 17: Foreign-invested enterprises may raise capital by publicly issuing stocks, corporate bonds, and other securities in accordance with law as well as through other means.

Article 18: The various levels of local government may with their legally prescribed authorities formulate foreign investment promotion policies.

Article 19: The various levels of people's governments shall, based on the principles of convenience, efficiency, and transparency, further increase the level of service for foreign investment.

The relevant competent departments shall formulate and publish foreign investment guidelines to offer services and convenience to foreign investors and foreign-invested enterprises.

Chapter III: Investment Protection

Article 20: The State will not expropriate foreign investment; under special circumstances, where foreign investment is expropriated for the public interest, it shall be conducted in accordance with legally prescribed procedures and give fair and reasonable compensation.

Article 21: Foreign investors' capital contributions, profits, capital gain, and intellectual property right royalties in mainland China as well as the compensation or indemnification they receive in accordance with law may be freely transferred out of mainland China in RMB or foreign exchange in accordance with law.

Article 22: The State protects the intellectual property rights of foreign investors and foreign-invested enterprises according to law, protects the lawful rights and interests of intellectual property right holders and relevant right holders, and encourages technological cooperation based on the principle of voluntariness and business rules.

The conditions for technological cooperation in the course of foreign investment are to be negotiated by the various parties to the investment, and administrative organs and their employees must not force the transfer of technological through administrative measures.

Article 23: Normative documents formulated by the various levels of people's governments and their relevant departments that involve foreign investment shall conform to the provisions of laws and regulations, must not unlawfully derogate from the lawful rights and interests of foreign-invested enterprises or increase their obligations, and must not unlawfully set market access or exit conditions or unlawfully interfere with or affect the normal business activities of foreign-invested enterprises.

Article 24: The various levels of local people's governments and their relevant department shall strictly fulfill the policy commitments made to foreign investors or foreign-invested enterprises and the various types of contracts concluded in accordance with law.

Where they change policy commitments or contractual agreements as necessary for the national or public interest, they shall proceed in strict observance of legally prescribed authorities and procedures and compensate the foreign investors or foreign-invested enterprises for any loss sustained as a result in accordance with law.

Article 25: The State establishes working mechanisms for complaints by foreign-invested enterprises, coordinates and improves the major policy measures in work on complaints by foreign-invested enterprises, and promptly resolves the issues raised by foreign-invested enterprises.

Where foreign-invested enterprises consider the administrative acts by administrative organs and their employees to have infringed upon their lawful rights and interests, they may resolve it through the working mechanisms for complaints by foreign-invested enterprises.

Article 26: Foreign investors and foreign-invested enterprises may establish and voluntarily join chambers of commerce or associations in accordance with law, carry out relevant activities in accordance with the provisions of laws, regulations, and charters, and safeguard their own lawful rights and interests.

Chapter IV: Investment Management

Article 27: For fields in which the negative list for foreign investment access provides that investment is prohibited, foreign investors must not make investment.

For fields in which the negative list for foreign investment access provides that investment is restricted, foreign investors shall meet the requirements provided by the negative list in making investment.

Fields outside the negative list for foreign investment access are to be managed according to the principle of consistency between domestic and foreign investment.

Article 28: The approval and recording of foreign-invested projects are to follow the relevant State provisions.

Article 29: Where foreign investors invest in industries or fields for which a license needs to be obtained according to law, they shall perform the relevant formalities for the license in accordance with law.

Except as otherwise provided by laws or administrative regulations, the relevant competent departments shall review foreign investors' license applications using the conditions and procedures consistent with those applied to domestic investment.

Where a license needs to be processed by multiple internal bodies of the same competent department, a single body shall be designated to uniformly accept license applications and to uniformly deliver license decisions; where a license is by law separately enforced by two or more competent departments, the relevant competent department shall optimize and integrate handling procedures and facilitate the license applications by foreign investors through means such as uniform acceptance, joint handling, or information sharing.

Article 30: The registration of foreign-invested enterprises as well as taxation, accounting, foreign exchange, and such other matters are to be handled in accordance with the relevant laws, administrative regulations, and State provisions.

Article 31: The State establishes a foreign investment information reporting system, and the content and scope of information reports are to be determined according to the principle of true necessity and strict control. Foreign investors and foreign-invested enterprises are to submit investment information to the competent departments for commerce through the enterprise registration system and the enterprise credit information disclosure system; they must not be requested to re-submit investment information that can be obtained through interdepartmental information sharing.

Article 32: Except as otherwise provided by laws, the relevant competent departments shall conduct oversight and inspections of foreign-invested enterprises according to the principle of consistency between domestic and foreign investment.

Article 33: The State establishes a security review system for foreign investment and conducts security review of foreign investment that affects or may affect national security.

Security review decisions made in accordance with law are final decisions.

Chapter V: Legal Responsibility

Article 34: Where the workers of the relevant government departments in their efforts to promote, protect, and manage foreign investment abuse their authority, neglect their duties, or misuse their power for personal benefit, they are to be given sanctions in accordance with law; if a crime is constituted, pursue criminal responsibility in accordance with law.

Article 35: Where foreign investors invest in areas in which the negative list for foreign investment access provides that investment in prohibited, the relevant competent departments are to order them to cease investment activities within a specified period and to restore the state before making the investment by disposing of stock shares and assets or through other necessary measures; where there is illegal proceeds, confiscate the illegal proceeds.

Where the investment activities of foreign investors violate the special restrictive administrative measures for access as prescribed by the negative list for foreign investment access, the relevant competent departments are to order them to make corrections and to take necessary measures to satisfy the requirements of special administrative measures for access; where they refuse to make corrections, handle in accordance with the provisions of the previous paragraph.

Article 36: The violations of laws or regulations by foreign investors or foreign-invested enterprises are to be investigated and handled by the relevant departments in accordance with law and recorded in the relevant credit information system in accordance with the relevant State provisions, and joint punishment is to be carried out.

Chapter VI: Supplementary Provisions

Article 37: Where any country or region takes discriminatory prohibitive, restrictive, or other similar measures against the People's Republic of China with respect to investment, the People's Republic of China may take corresponding measures against such country or region based on the actual circumstances.

Article 38: Where the State has separate provisions for foreign investors' investment in mainland China in such industries as banking, securities, or insurance or in the administration of such financial markets as securities market or foreign exchange market, follow those provisions.

Article 39: This Law takes effect on xxxx-xx-xx. The "P.R.C. Chinese-Foreign Equity Joint Ventures Law," the "P.R.C. Wholly Foreign-Owned Enterprises Law," and the "P.R.C. Chinese-Foreign Contractual Joint Ventures Law" are simultaneously abolished.

Foreign-invested enterprises that are established in accordance with the "P.R.C. Chinese-Foreign Equity Joint Ventures Law," the "P.R.C. Wholly Foreign-Owned Enterprises Law," or the "P.R.C. Chinese-Foreign Contractual Joint Ventures Law" before this Law takes effect may retain their original corporate organizational forms within five years after the implementation of this Law.

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