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China’s new law aims to ease global concerns

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China has passed a new foreign investment law in a move widely seen as an effort to facilitate US trade talks. Delegates voted overwhelmingly in favour of the law on the final day of the National People’s Congress (NPC).

The measure is seen as a possible olive branch to the US as negotiators from both countries work to resolve their bruising trade dispute. But some argue it does not fully address the concerns foreign firms have about doing business in China.

Delegates at the NPC, the annual meeting of China’s legislature, passed the bill with 2,929 in favour, eight against and eight abstentions.

The law will come into effect on 1 January 2020.

It comes roughly three months after a first draft was discussed, a particularly fast turnaround in China, as Washington and Beijing work to resolve their trade dispute.

The trade battle has seen both sides impose tariffs on billions of dollars worth of one another’s goods since last year.

The BBC’s Stephen McDonell said the Chinese government appears to have rushed through the investment law as an olive branch to the US amid trade war negotiations.

Many in the business community in China see this law as a kind of sweeping set of intentions rather than a specific, enforceable set of rules, he says. They fear it could be open to different and changing forms of interpretation.

The new law aims to create a more level playing field between domestic and foreign businesses.

In a statement earlier this week, the American Chamber of Commerce in China welcomed the “legislative effort to improve the foreign investment climate”.

But it said some provisions were “still quite general and do not address a number of the persistent concerns of foreign companies or foreign-invested enterprises in China”.

But this law isn’t going to help everyone.

There is a “black list” of 48 sectors that will not be open to foreign investment or, in some cases, not open without conditions or special permission.

For example, there is a complete ban on investing in fishing, gene research, religious education, news media, and television broadcasting.

Partial investment is allowed in oil and gas exploitation, nuclear power, airlines, airport operation, and public health, amongst others sectors.

Non-renewable energy automobile production will require partnerships for a few years but then be phased out.

For industries not on the list, the principle is that foreign companies will receive the same treatment as their Chinese counterparts.

But should foreign companies also be wary?

One of the provisions will include a requirement for the local subsidiaries of international firms to report various details of their operation to Chinese officials.

This could include performance indicators relating to labour relations, overall staffing numbers, pollution records and the like.

That sounds fine except that foreign companies have asked for – and not received – legal guarantees that this data will not be passed on to their Chinese competitors.

Then there is the promised complaints procedure should you seek redress following any perceived violations of the new law.

If this system is run through the normal Chinese courts, which routinely guarantee results favourable to the Communist Party, then to many this would not seem like a satisfactory enforcement mechanism.

One part of the law specifies that there is to be a ban on “illegal government interference” in the activities of foreign business.

The further you go up the government ladder the more implausible it would be to win in such a dispute.


Source: BBCB

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