<![CDATA[Will a new Chinese law level the playing field for foreign investors?]>
China's top legislators will vote next week a new law that its backers say will level the playing field for foreign investors, as Beijing tries to fend off complaints from Washington and Brussels about unfair trade practices.
The latest draft of the foreign investment law was presented to the National People's Congress for discussion in the Chinese capital on Friday and its progress will be closely watched by investors at home and abroad.
Wang Chen, vice-chairman of the NPC's Standing Committee, said the legislation would "promote foreign investment, protect the lawful rights and interests of foreign investors in the new era", and "foster a market environment in which domestic and foreign capital compete on a level playing field".
"With this new law and specific supporting regulations and rules, we will improve the legal system to promote, protect and regulate foreign investment activity and make our foreign investment work more law-based," Wang said.
China's biggest trading partners, the United States and the European Union, have repeatedly complained about poor market access, unfair competition, forced technology transfer and weak intellectual property protection in the world's second-biggest economy.
The draft is based on two rounds of public consultation and was amended slightly to clarify the complaints process, including steps that foreign players can take to apply for administrative reviews and litigation.
If passed, the legislation would replace three other laws governing foreign investment " the Chinese-Foreign Equity Joint Venture Law, the Wholly Foreign-Owned Enterprises Law and the Chinese-Foreign Contractual Joint Ventures Law.
But the consensus in the foreign business community in China is that the law lacks substance and that it is being rushed through to meet some of the terms of a trade war truce laid out by US President Donald Trump.
One of the big questions is whether the draft law would address US concerns, especially in the area of forced technology transfer.
Article 22 explicitly prohibits administrative agencies and their staff from using administrative means to force the transfer of technology.
Gordon Milner, partner at law firm Morrison & Foerster, said the principle was welcome and "likely been included to assuage concerns raised by the US" during trade talks.
"However, many of the current issues with forced technology transfers arise from the complex interplay between different regulations rather than from express legal obligations, and it is questionable how effective the high-level prohibition will be absent a root-and-branch review of those underlying regulations," Milner said.
Some Chinese legislators rejected suggestions that the legislation was linked to the US-China trade war, saying it simply reflected China's determination to improve its economy and legal system.
"We have had related laws before. This time it supplements existing legislation " it's not a concession to the United States," Zhang Zhaoan, from the Shanghai Academy of Social Sciences, said.
Shao Zhiqing, deputy director of Shanghai Municipal Commission of Economy and Informatisation, said that draft law showed China's willingness to further open up its market.
"Our legislation has been advancing with the times. At every historical stage, we are protecting and managing foreign investment," Shao said.
"When I started to build Lenovo's personal computer business, we could only sell 20,000 units a year. IBM and Hewlett Packard's sales were 100 times greater than ours," Yang said.
"If we can win a competition as fierce as that one, so can other Chinese companies. We have more established businesses in China and we have a big market, we should not be afraid of competition."
This article originally appeared on the South China Morning Post (SCMP).
Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
