Confidence booster for foreign investors in China

No one questions the vital role the 950,000 foreign-funded enterprises registered in China have played in driving the country's miraculous economic and social development over the past four decades.

In Shanghai alone, such companies, whose number accounts for only 2 percent of the city's total, contribute about 27 percent of the economic powerhouse's GDP; and nationally, foreign-funded companies account for 10 percent of China's employment, 20 percent of its tax income and nearly half of its foreign trade.

Thus 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.

In the latest move to serve that purpose, a draft law on foreign investment — to replace three existing laws, namely, on Chinese-foreign equity joint ventures, nonequity joint ventures (or contractual joint ventures), and wholly foreign-owned enterprises — has been submitted for approval to a bimonthly session of the National People's Congress Standing Committee, the top legislature, which opened on Dec 23.

The draft seeks to boost foreign investors' confidence in the Chinese market by streamlining the rules governing foreign investment and broadening market access for foreign investors, and addressing concerns such as the forced transfer of intellectual property.

Obtaining required licenses can be a headache for foreign investors, as under the existing laws most foreign investment projects are subject to lengthy, and sometimes cumbersome, approval procedures. The draft law will be a painkiller as only those projects in restricted sectors — as set out in a negative list — will need to obtain a market entry permit. And it should be pointed out that China unveiled a shortened negative list in June. The number of items on the list was reduced from 63 to 48, and officials have pledged to further shorten it next year to open up more sectors to foreign investment.

To strengthen property rights protection, the draft prohibits government departments and officials using administrative means for forced technology transfers and stipulates that technological cooperation concerning foreign investment be decided by all parties concerned through negotiation.

The measures to ease market entry are the result of the government's steady and thoughtful process of experimentation and adjustment, and benefit both the Chinese economy and foreign investors by providing a sound investment environment and predictable growth prospects for foreign investors.