China fast-tracks foreign investment law as US trade talks begin

China’s National People’s Congress announced on Wednesday that a new foreign investment law will be submitted for ratification during a plenary session slated to begin in early March.

The law enumerates rules to better protect foreign firms doing business in China, and its accelerated passage comes as trade talks are taking place in Washington this week.

The decision in effect makes the passage of the law certain, with the official vote in March by the rubber-stamp legislature seen as largely ceremonial.

“Once adopted, the unified law will replace three existing laws on Chinese-foreign equity joint ventures, non-equity joint ventures (or contractual joint ventures) and wholly foreign-owned enterprises,” China’s official Xinhua News Agency reported.

“There is an urgent need for such a unified law to provide stronger legal protection for further expanding opening up and better using foreign investment,” Justice Minister Fu Zhenghua said when introducing the draft to lawmakers.

A draft of the legislation published in December includes some provisions that address specific issues of contention with the United States, including forced technology transfer.

Covington and Burling, a law firm that advises on Chinese regulations, examined the draft in a blog post on Tuesday, noting a section regarding forced technology transfers.

“Article 22 states that technological cooperation should be conducted on the basis of ‘free will and commercial norms,’ and provides that ‘administrative authorities and their personnel may not force technology transfer via administrative measures,’” the authors wrote.

But the article notes: “Today, it is quite rare for the types of forced technology transfer of concern to foreign investors to be implemented via administrative measures or other written documents. Instead, they are generally implemented through the exercise of administrative discretion or are a direct or indirect consequence of the structure of laws, regulations, and policies that make it difficult or impossible to compete in a market without transferring technology.”

That point echoes criticisms levied against China by Trump administration officials and highlights the difficulty in negotiating a solution to an issue that is subject to interpretation. Since technology transfer is not “forced” through administrative government measures, Beijing contends the allegations as articulated are unfounded.

Officials have been tight-lipped on the first day of trade talks, led on the Chinese side by Vice-Premier Liu He and on the US side by Trade Representative Robert Lighthizer.

US President Donald Trump and several top aides have expressed optimism in recent days that a deal before a March 1 deadline is more likely than not. If a deal, or an extension to the deadline, is not reached before that date, the Trump administration says it will raise tariffs on Chinese goods.