Highlight – How American Companies see the Foreign Investment Law?

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At the 2019 Two Sessions political meetings (the National People's Congress and the Chinese People's Political Consultative Conference), China adopted the Foreign Investment Law.

Consisting of 41 articles in six sections, and stressing investment promotion, protection, and legal responsibility, the Foreign Investment Law's prime objectives are to improve the openness, transparency and predictability of the investment environment for foreign investors.

How does the American business community see the new foreign investment law? Since it is said that the law will enable local governments to interpret it very differently from one region to another, perhaps competing with one another, how will foreign companies deal with the uncertainty? R. L. Kuhn discussed this issue with William Zarit, former Chairman of American Chamber of Commerce.

On March 10, 2019 at the second session of the 13th National People's Congress, the Jiangsu delegation held a meeting to review the "Foreign Investment Law of the People's Republic of China (Draft)”. /VCG Photo

According to Zarit, the American business community sees the law as a good step forward. The major drawback, however, is that it is vague.

The American business community understands that the law is vague in order that the NPC standing committee can come up with an agreement that can be passed, but they hope to have, in the near future, other regulations that will describe the law more specifically.

Zarit says that the new foreign investment law can be beneficial to foreign companies which understand how to work in China, which have been successful in developing relationships, and which can make sure that whatever investment they make is not only good for the company itself, but also good for where they are investing. In this sense, the law makes room for some flexibility.

However, Zarit adds that many western companies are much more comfortable with defined and definitive rules to follow. Therefore, they are less adept at working in such a somewhat ambiguous environment, and may become less willing to invest until regulations are specified with clarity.