A number of Chinese individuals obtained a business license for the foreign enterprises they have invested in as China’s Foreign Investment Law came into effect as of January 1, 2020. The law lifts the restriction on Chinese citizens investing in foreign enterprises as individuals. According to analysts, this has helped bring more enthusiasm to private investment both at home and abroad.
To facilitate foreign investment and build a fair and transparent business environment is the focus of the new law, which states that foreign-invested companies may enter any field outside the Negative Lists and apply for the same support policies as domestic enterprises. The law also demands that local governments strengthen the protection of foreign-invested enterprises’ property rights and improve the system of dealing with complaints from foreign-invested
enterprises.
Just one week after the law came into effect, a court in Shanghai heard a dispute over stock rights where an American investor, identified in media reports as “Carson,” required that his stake in the defendant, a local import and export company, was transferred to him. The stake was held by a third party on his behalf as stated in the contract.
Given the business of the import and export company was not covered by the Negative Lists, the court denied the defendant’s counterclaim that the contract was not yet registered and approved by local business departments. The court found for the plaintiff.
Analysts said that the case proves that the new law is working as intended, and that it will greatly increase foreign investors’ confidence in China.
Besides passing the investment law, the Chinese government rolled out measures to facilitate and encourage foreign investment in 2019, including shrinking the Negative Lists, removing the other restrictions on foreign investment not covered in the Negative Lists and simplifying the administrative procedures for the registration of foreign-invested enterprises. According to the Ministry of Commerce, China attracted 722 foreign-invested projects valued at above US$100 million from January to November 2019, a growth of 15.5 percent compared to the same period of 2018.
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