China's new draft law to boost foreign investors' confidence

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03:12

China has begun reviewing a draft law which can be seen as a signal to fulfill the country's promise to further open up its financial market, strengthen protection of foreign investment and give foreign companies greater access to the world's second-largest economy.

The new draft law on foreign investment, released by the Standing Committee of the National People's Congress, is expected to combine the country's three foreign investment laws to promote and protect foreign investment.

The draft is to be seen as a way to attract foreign investors to the Chinese market by streamlining the rules governing foreign investment and broadening market access for foreign investors. Experts think that "it is not a simple response to the demand of the U.S., but to improve the business environment in China."

"Both foreign business and domestic firms can really benefit from it because after all, investments normally involve either joint ventures or trading partners. It's the whole supply chain that will benefit from this law," said Liu Baocheng, the dean of the Center for International Business Ethics, University of International Business and Economics.

It is not surprising that the Chinese government has always sought to protect and promote foreign businesses in the country, by providing them with fair treatment and a level playing field, even in "fragile global environment," according to the expert.

Liu Baocheng, the dean of the Center for International Business Ethics, University of International Business and Economics, during a studio interview with "Global Business" in Beijing, China. /CGTN Photo

Even as foreign direct investment was on a decline in 2018 worldwide, in China, on the contrary, there was an increase. Liu believes that the new draft law will boost foreign direct investment in China, which also goes along with the theme of opening-up further.

Liu explained the reason behind.

"Business has its own formula to make decisions. They do not have to necessarily comply with those politicians who are attempting to bring them back," said Liu while explaining the reason behind China's increasing foreign direct investment.

"More importantly, since China joined the WTO, it has really been a consumer market. The market is there to support research and development and the growth of skills and diversity that could really be attracting foreign investors. Also, Chinese companies are not only doing the OEM (Original Entrusted Manufacture), they are participating in the entire value chain construction," he added

He also noted that now is the high time (to submit the law), because China now has the confidence and Chinese businesses are mature enough to face the competition and this competition will turn out to be a virtual cycle.

"In the end, the law will benefit Chinese consumers, importers as well as the global community," said Liu.