The new company law China of foreign-invested enterprises

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Introduction

With the development of China’s economy, there are more and more foreign investors in China. The old company law China of foreign investment no longer meet the needs of the current society.

So, the new foreign investment law was implemented on January 1, 2020. At the same time, the old three laws were immediately invalidated.

Now let’s figure out the current situation of foreign investment in China.

The lapse of the old three laws

In the Past

In 1979, the second year of Chinese reform and opening up, China first foreign-invested enterprise law was born.

Next, in 1979, China implemented the first foreign investment law.

In 1986 and 1988, the implementation of two other laws on foreign investment began.

So far, China’s has formed the legal system for foreign investment.

By the end of 2018, there were already 960,000 foreign-invested enterprises in China.

Meanwhile, the amount of foreign capital has exceeded US$2.1 trillion.

Therefore, foreign investment is very important to our economic and social development.

After 40 years of development, foreign business development is getting better and better.  However, the relevant laws in early company law China have been difficult to adapt to the needs of social development. At the same time, the old company law China is difficult for them to adapt to the requirements of market leadership and enterprise independence. Although the company law China was issued later replaced the content. There are still some regulations in these systems failing to meet international standards.

Current Situation

Nowadays, China not only encourages and promotes foreign investment but also protect the legitimate rights and interests of foreign investment. So, China regulates the management of foreign investment, as well as continuously optimize the foreign investment environment. That promote higher levels of opening up.

Therefore, to meet the actual needs, China formulates a new <Foreign Investment Law>.

It adapts to the new situation and new requirements. Moreover, this law forms the basic framework of our foreign investment law.

The <Foreign Investment Law> has come into effect on January 1, 2020.

Meanwhile, repeal the previous three laws.

About the New Law

As we all well known, the <Foreign Investment Law> will come into effect on January 1, 2020.

The new law has made unified regulations on the access, promotion, protection and management of the foreign investment. And it is the new basic law in the field of foreign investment in my country.

Advantages of the New Law

  • Provide a strong legal guarantee for promoting a higher level of opening.
  • Formulate and improve supporting regulations.
  • Refine the main legal system determined by the foreign investment law
  • It is of great significance to ensure the effective implementation of the Foreign Investment Law
  • Legislative position in line with the foreign investment law supporting administrative regulations
  • Strictly implement the legislative principles and purposes of the Foreign Investment Law
  • More prominently promote and protect the main tone of foreign investment
  • Continuously optimize the foreign investment environment, further boost foreign investor confidence and stabilize investment expectations
  • Further opening up to the outside world and economic and social development

Content

On the one hand, it clarifies the matters that need to be detailed in the foreign investment law.

On the other hand, it enhances the feasibility of the legal system and guarantees the effective implementation of the law.

Moreover, China adjusts the negative list in time according to needs.

Current laws applicable to foreign investors

For the conditions, procedures, and time limits for foreign investors to handle,

China will be equal in the following aspects:

  • Funding arrangement
  • Land supply
  • Tax reduction
  • Qualification permit
  • Standard-setting
  • Project declaration
  • Human resources policy
  • National mandatory standards

Discount for foreign-invested enterprises

According to the needs of the national economy and social development, China has formulated a catalogue of industries that encourage foreign investment.

This directory catalogue specific industries, fields, and regions encouraged and guiding foreign investors.

Foreign enterprises have preferential treatments in finance, taxation, finance and land use.

Foreign investors expand investment in China.

This investment could be a be foreign investment income generated in China.

Besides, foreign investors have corresponding discounts according to law.

According to local conditions, governments at and above the county level can provide policy. This policy measures for promotion and facilitation. For example, fee reduction, land use index guarantee, public service provision, etc.

These measures purpose should be good at promoting high-quality development. Also, it is conducive to improving economic, social and ecological benefits. And then, it is conducive to continuously optimizing the foreign investment environment.

Foreign investors can participate in government work

Foreign-invested enterprises may participate in the following formulation and revision work. And they are on an equal basis with domestic-funded enterprises:

  • National Standard
  • Industry standards
  • Local standards
  • Group standards

Foreign-invested enterprises may not only formulate their standards according to their needs but also combine other enterprises.

Besides, foreign investors can make comments and suggestions in the following areas:

  • Standard project
  • Drafting
  • Technical review
  • Information feedback
  • Evaluation

In addition, foreign businessmen can also undertake work related to the above.

And the can-do standard foreign language translation work.

Besides, foreign investors should also strengthen supervision and inspection of government procurement activities.

As you can see, they can also correct and investigate the government’s violations of laws and regulations by foreign investors:

  • Differential treatment
  • Discrimination

For government procurement activities:

  • They can inquiry and doubt the purchaser or agency.
  • In serious cases, you can complain to the government procurement supervision and management department.
  • Moreover, the relevant personnel and departments should reply within the prescribed time.
  • Sometimes, foreign investors and foreign-invested enterprises consider that regulatory documents are illegal. They can apply for administrative reconsideration or file an administrative lawsuit. And you can also request a review of the file.

The government cannot interfere with:

First, the government cannot hinder or restrict foreign businessmen from entering the government procurement market in the region and industry.

Secondly, purchasers and procurement agencies of government procurement shall not restrict suppliers on unreasonable conditions.

Administrative agencies shall not use administrative means to force foreign businessmen to transfer technology.

In addition, no technical requirements higher than the compulsory standards shall be raised by foreign investors.

Also, the government shall not restrict the currency, amount, and frequency of remittances and remittances.

Penalty Policy

If the government and relevant departments and their staff violate laws and regulations, China will punish them according to law.

If no action is taken within the time limit, the person directly in charge shall be punished according to law.

Patent

For patents of foreign investors, the government shall handle the patent management regulations.

The foreign investor provided materials and information. And the information refers business secrets. The government can only know the necessary part, according to its duties.

In addition, personnel unrelated shall not have access to relevant materials and information.

Of course, the government has the responsibility to protect foreign business secrets.

The government and its relevant departments formulate regulatory documents. And they should concern foreign investment. So, they shall conduct legality review according to the regulations of the State Council.

When the government changes the contract, it will compensate the foreign businessmen fairly and reasonably.

For Property Export:

In the first place, foreign investors can freely remit and remit RMB and foreign exchange property in China.

Moreover,foreign employees can remit their legal income freely according to law.

Investment Protection

For the protection of foreign investment, China’s new law has made the following measures.

The state does not impose levy on foreign investors’ investments

Under special circumstances, the state implements expropriation for the sake of public interest. In this case, China will give compensation according to its market value in time.

At the same time, if foreign investors do not agree to the levy, they may apply for administrative reconsideration.

Basic Rights

To start with, foreign-invested enterprises can raise funds in China or abroad according to law.

In addition, the relevant competent department should prepare and publish guidelines for foreign investment.

And then, the government provides services and facilities for foreign investors and foreign-invested enterprises.

And related contents, the government shall update them in time.

Change of Organization Form

Within five years after the implementation of the Foreign Investment Law, the foreign investors shall adjust the organization form according to the new law.

And they can also handle the change registration according to law.

It is also possible to continue to retain the original enterprise organization form and organization.

Since January 1, 2025, if the enterprise has not been adjusted according to law, the relevant department will not process other registration items of its application and formulate the relevant circumstances.

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Reformation of New law reform

The new company China simplify the procedures, and let foreign businessmen have better development in China. China has issued new laws.

The legislative model

Has realized the transformation from enterprise organization law to investment behaviour law.

Value orientation

the national treatment has changed from after entry to before entry, and the principle of national treatment has been more comprehensively implemented.

Core content

Has shifted the focus from approval to foreign investment promotion and protection

The role of the government

Has shifted from pure regulation to equal emphasis on management and services.

In summary, these measures of the new company China are conducive to the sound development of foreign investors in the Chinese market.

Comparison of the new law and old laws

The new company law China provides a strong guarantee. And that promotes a higher level of opening to the outside world.

And the new company law China also improves supporting regulations.

Besides, the new company law China refines the main legal system determined by the Foreign Investment Law. It is of great significance for ensuring the effective implementation of the new company law China.

Insufficiency of the old methods

The old company law China belongs to the typical corporate organization law. They have duplicates in legal provisions. Therefore, applicability of the old company law China is not good.

Administrative approval is the main management method of the old law.

And it is not in line with the current market-driven and enterprise-independent development trends.

Conclusion

After the implementation of the new company law China, the Chinese government has changed from a regulatory role to a management and service role.

In the company law china, the process of foreign business registration and approval is also much simpler.

In addition, the new company law china has good protection measures against foreign patents and trade secrets.

At the same time, China has also given many preferential policies to foreign investors.

These changes of the new company law China will help foreign investors develop better in the Chinese market.

So, if you are interested in starting a company in China, the current situation is conductive.

At last, if this blog helps you with the New Foreign-invested Las issue, please share with the one who needs it. And enjoy your promising business trip in China.

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