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Feb 2015, Issue 5

A key milestone on administrative regime for foreign investments - China's Foreign Investment Law (Discussion Draft)


On 19 January 2015, the Ministry of Commerce (MOC) released the discussion draft of the (the "Discussion Draft" or the "Foreign Investment Law") and its explanatory notes for public comments. This marks a significant legislative milestone for the Chinese government to further simplify and deepen the reform of the administrative approval system. The Discussion Draft aims to reduce the administrative cost for foreign capitals to invest in China and to create a stable, transparent and predictable legal environment for foreign investors through restructuring the approval, supervision and governance mechanisms. The current three sets of Foreign Investment Laws will be replaced by this new Foreign Investment Law, resulting in a significant impact on China's administrative regime for foreign investments.

The Discussion Draft sets forth the legal basis and framework of guidance for foreign investments in China. In the future, China's governance on foreign investments will be changed from the current case-by-case approval system to a new mechanism comprising of pre-establishment national treatment and a negative list with the purpose to establish a "limited approval and comprehensive report" system. In addition, the Discussion Draft also provides clarifications regarding the security review system, contemporaneous and post-registration supervision and administration, investment protection and coordination for foreign investments.

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