FDI Will Lift China Growth

FDI Will Lift China Growth

China’s legislature will vote next week on a highly-anticipated bill that will bring “a fundamental change” for foreign investors, an official said Monday, in a move that could help ease US trade tensions.

The draft foreign investment law will be the most closely watched item at the annual two-week session of the rubber-stamp National People’s Congress, which opens on Tuesday.

The legislation seeks to address longstanding complaints from foreign companies, though Europeans voiced concerns that it was being fast-tracked to meet US demands on trade.

The bill will eliminate the requirement for foreign firms to transfer proprietary technology to Chinese joint-venture partners — a central issue in China’s trade negotiations with the United States.

It also promises to abolish the “case-by-case approvals” process for foreign investments, NPC spokesman Zhang Yesui said at a news conference.

The change will ensure that foreign investors will enjoy the same privileges as Chinese companies in most sectors, except those placed on a “negative list”.

chinese photo

Beijing uses negative lists to identify areas that are either off-limits to non-state businesses or that require them to go through an application and approval process.

“Areas for prohibiting and restricting foreign investments shall be clearly listed and areas outside the negative list will be fully open,” Zhang said.

“Chinese and foreign investment will enjoy the same treatment.”

The new “unified law” will replace three existing laws on Chinese and foreign equity joint ventures, non-equity joint ventures and wholly foreign-owned enterprises.

“This is a fundamental change in our foreign investment management system, which will improve the openness, transparency and predictability of the investment environment,” Zhang said.

US and EU officials have long complained of a lack of fair access for foreign companies in China, as well as rampant theft of intellectual property.

Tim Stratford, chairman of the American Chamber of Commerce in China, said last week “our initial impression is positive” but that businesses were waiting for further detail.

But the European Chamber of Commerce said it fears the legislation is being fast-tracked to meet US demands.

The NPC will vote on the draft law on March 15, the last day of its annual session.

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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