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Change of Regulatory Scheme: China’s New Foreign Investment Law and Reshaped Legal Landscape

Abstract

Protection of foreign investment has long been an issue facing China.  The newly adopted Foreign Investment Law (FIL) and Implementation Regulations not only unify the foreign investment regulations but also reformulate the regulatory regime that governs foreign investment in the country.  In response to the mounting criticism of the practices in China that damage the interests of foreign investors, including, among others, forced technology transfer and commercial theft, the FIL is purposed to build a better environment so that foreign investment will be more effectively protected.

The FIL changes the main themes of China’s regulation of foreign investment and puts new market access rules and measures in place on the foreign investment horizon.  The FIL Implementation Regulations intend to fill the gaps left in the FIL.  Still, many questions remain unanswered.  Both the broadness and vagueness of the FIL require further clarification and specific measures in different aspects.  The Supreme People’s Court is expected to issue judicial interpretations on various practical matters.

The FIL is charged with the mission to even the playing field by providing fair treatment to foreign investors in the country, but the challenges encountering foreign businesses seeking establishment in China remain.  The clear rules of implementation aside, an effective enforcement mechanism is essential to the achievement of the intended goals of the FIL.

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