It was hailed as a benchmark piece of legislation but China’s new foreign investment law failed to impress business groups. As the National People’s Congress wrapped up in Beijing on Friday, Premier Li Keqiang pledged again to protect overseas companies operating in the world’s second-largest economy.
Fast-tracked for approval at the annual session of the rubber-stamp parliament, the law comes into effect on January 1, 2020.
Key points include eliminating forced technology transfer, as well as protecting Chinese joint-venture partners against “illegal government interference.”
Both issues have been raised during detailed talks between Beijing and Washington in a move to avert an escalation in the 10-month long trade war.
“If opening up measures are being spoken of, then, of course, they will be honored,” Li told a media conference.
Still, concerns exist in the international business community.
Tim Stratford, the chairman of the American Chamber of Commerce in China, pointed out that the vague language in the legislation allowed local governments to expropriate investments that “harm the public interest.”
He also highlighted the inability of foreign firms to appeal against the outcome of national security reviews.
“[The changes] only address a small slice of the overall set of concerns our members have about the uneven playing field foreign companies encounter in China.”
During the past 12 months, Washington has pressed Beijing to end policies it argues have handed domestic companies an unfair advantage.
These include state subsidies, limited access for foreign companies in various sectors, which are commonly known as “negative lists,” and theft of intellectual property.
“The addition of language imposing criminal penalties for sharing sensitive foreign company information adopts a much tougher deterrent against counterfeiting and IP theft and will offer new avenues for the enforcement of IP protection,” Jacob Parker, the vice-president of the US-China Business Council in Beijing, told Reuters.
But he added that “while the language on criminal liability is positive, it will be difficult to enforce.”
Kyle Freeman, a lawyer at Dezan Shira & Associates, pointed out that businesses will still need to negotiate “several hurdles” to gain market access.
“There are continued concerns that the on-the-ground reality of industry-specific laws, regulations and local administrative approvals … may impede full market access at the implementation level, despite provisions in the negative list,” he told the AFP news agency.
Yet the move by Beijing to act appears to have brought a peace deal with Washington a step closer.
The official state news agency Xinhua reported earlier that the US and China have made “concrete progress,” following a telephone conversation between Vice-Premier Liu He and US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
“The two sides have further made concrete progress on the text of the trade agreement between the two sides,” Xinhua said on Friday, without expanding on its short statement,
Just hours earlier, US President Donald Trump stressed that a clearer picture regarding a deal would emerge in the next three or four weeks.
“We’ll have news on China. Probably one way or the other, we’re going to know over the next three to four weeks,” he said during a St Patrick’s Day reception in the White House’s East Room.
“[China had been] very responsible and very reasonable. If that one gets done, it will be something that people will be talking about for a long time,” Trump added.
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