Emerging Trends 07.27.20
Emerging Trends
Emerging Trends
07.27.20
Since China opened its market for foreign investments in the early 1980s, foreign investors would normally use three major types of business forms for incorporating foreign invested entities (FIEs), i.e., equity joint ventures (EJVs), cooperative joint ventures (CJVs) and wholly foreign-owned enterprises (WFOEs). The laws and implementing rules respectively governing the EJVs, CJVs and WFOEs (known as the Three Laws) published in the 1970s-1990s, as amended from time to time, have served as the fundamental laws governing foreign investment in the mainland of the People’s Republic of China (PRC or China).
Given trade disputes and ongoing trade negotiations with the United States, the Chinese government accelerated the legislation process for the issuance of the Foreign Investment Law to demonstrate its positions on major concerns of foreign investors. On March 15, 2019, the National People’s Congress (China’s legislative organ) passed the Foreign Investment Law. On December 31, 2019, the State Council of China published the Implementing Regulations for the Foreign Investment Law (Implementing Regulations).
The new Foreign Investment Law and its Implementing Regulations came into effect on January 1, 2020. These new standards replace and update the Three Laws with a single unified law. The enactment of the Foreign Investment Law and its Implementing Regulations demonstrates the Chinese government’s intention to promote foreign investment by better protecting the rights and interests of foreign investors and standardizing foreign investment.
We discussed the impacts of the Foreign Investment Law on foreign investments in China in an earlier alert. In this series of articles, we address the following practical issues that foreign investors and their subsidiaries in the PRC should be aware of and take actions as a result of the new legal regime: