However, companies will have to wait as the updated foreign investment law is not due to come into effect until January 1, 2020. The legislation is regarded as Beijing’s response to growing complaints from Washington that China is forcing foreign investors to transfer technologies to local partners or ‘stealing’ technologies from US firms, according to a South China Morning Post report.
With the new law, Chinese officials will be obliged to protect commercially confidential information they obtain from overseas businesses, according to the latest draft of China’s new foreign investment law. Delegates to the National People’s Congress (NPC) in Beijing were presented with the new version on yesterday, after last week’s version received a lukewarm response from foreign businesses and academics in China. Provisions have been added to the legislation which make clear that government employees must keep secret any confidential commercial information from foreign firms and must ‘not leak or give to others illegally’ according the report. The law will make it illegal for officials to misuse critical information or to provide it to local Chinese firms, on pain of administrative or even criminal punishment.
Beijing is also promising a level playing field for investors with the new law, in an effort to reassure the global investment community as China’s attractiveness as an investment destination wanes amid rising costs at home and growing hostilities abroad. The foreign investment law stipulates clearly that China will give equal treatment to foreign firms in government procurement of not only products, but also services. The earlier draft only mentioned products. China’s lawmakers have reassured investors from Hong Kong, Macau and Taiwan that their investment in China will not be hindered or restricted by the new legislation, even though they are not specifically mentioned in the text. The new law replaces the ‘three foreign capital laws’ of the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Contractual Joint Ventures and the Law on Foreign-Capital Enterprises, and is expected to be officially endorsed by the largely ceremonial legislative session later this week.