Draft foreign investment law seen by critics as bid to mollify US

BEIJING • China has fast-tracked a draft foreign investment law that it says will level the playing field for foreign firms, but overseas experts and businesses remain sceptical.

Yesterday, the draft law was tabled for its third reading at the National People's Congress (NPC), also known as China's Parliament.

It is expected to be passed with minimal amendments at the close of the NPC session next Friday.

Much slimmed down from previous versions, the draft legislation is meant to be a basic law governing foreign investments in China and will replace three existing laws.

At just 41 articles, it is far shorter than a 2015 version with 170 articles which was stalled in the NPC.

The articles include provisions which state that local and foreign firms will be treated equally in government procurement, and that foreign companies will be consulted on new policies and regulations.

Another article promises to create a stable, transparent and predictable market environment.


The draft law addresses many issues at the heart of trade frictions between China and the United States, including forced technology transfers and intellectual property rights.

NPC standing committee vice-chairman, Mr Wang Chen, told lawmakers yesterday the draft law showed China's commitment to "promoting high-standard investment liberalisation" while protecting the legitimate rights of investors.

Critics, however, said the draft law, which is being pushed through at an unprecedented rate, appears designed mainly to mollify American trade negotiators as China and the US move closer to a trade deal.

They noted that its first reading took place just last December, while most laws take years to pass.

"We are concerned that the drafting of the foreign investment law is being squeezed between the normal legislative process and the negotiation table with the US, in part to address the trade conflict," said Mr Mats Harborn, president of the European Union Chamber of Commerce in China.

The broad terms and vague language in the current draft "read more like policy commitments than binding legal clauses, which leave room for discretionary implementation of the law", he added.

Washington-based China analyst Austin Lowe said the ambiguous provisions mean that how the law applies in reality will be dictated by circulars issued by the Communist Party, which raises questions about its ultimate effectiveness.

"Given the current law's shortcomings, China should at the very least implement supporting regulations to ensure the law's good-faith implementation in sectors that are legally open to foreign investment," he wrote.

A version of this article appeared in the print edition of The Straits Times on March 09, 2019, with the headline 'Draft foreign investment law seen by critics as bid to mollify US'. Print Edition | Subscribe