Q&A on New China “Foreign Investment Law” (II)-Company Formation_Trademark Registration_Tax Service - Hong Kong CPA

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Q&A on New China “Foreign Investment Law” (II)

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The "Foreign Investment Law of the People’s Republic of China" has officially come into force on Jan 1,2020. As the new fundamental law for foreign investment, what are the highlights of this law, let's follow Kaizen's footstep into it!

What is “Foreign Investment Law”?

The full name of “Foreign Investment Law” is “Foreign Investment Law of the People's Republic of China”, it’s a new basic law in the field of foreign investment in China that will replace the “three foreign investment laws” formulated since the reform and opening up, namely the Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures,Law of the People’s Republic of China on Foreign Capital Enterprises, Law of the People’s Republic of China on Sino-Foreign Contractual Joint Ventures. The enterprises which established by the “three foreign investment laws” may retain their original organizational form of enterprises within five years after the implementation of the law on foreign investment.

Are Hong Kong, Macao, Taiwan investors belong to foreign investor?

There is no reference to investment in Hong Kong, Macao and Taiwan in the “Foreign investment law”, but in practice, investment in Hong Kong, Macao and Taiwan has long been reference to the “Foreign investment law” and will not change.

After the implementation of "Foreign Investment Law", what changes will bring to the registration of enterprises?

The establishment and alteration of foreign invested enterprises shall no longer be subject to examination and approval and record filing.

What are the basic principles for managing foreign investors?

The state maintains a system of pre-entry national treatment plus a negative list management for foreign investment. We have following understandings according to this basic principle:

Pre-entry national treatment refers to the treatment given to foreign investors and their investment at the stage of investment admission no less than that to domestic investors and their investments.
The negative list refers to the special management measures that are adopted for the admission of foreign investment in specific areas.
The State gives national treatment to foreign investment outside the negative list.
The negative list is issued or approved by the State Council. Where international treaties or agreements concluded or acceded to by the People's Republic of China provide for more preferential treatments for the admission of foreign investment, the relevant provisions may be applied.

What are the main differences between the "negative list" generally applied in the “Foreign investment law” and the "negative list" applied in the free trade zone?

Name of Category		Special Administrative Measures for the Access of Foreign Investment (Negative List) (2018 Edition)	Special Administrative Measures for Foreign Investment Access in Pilot Free Trade Zone (Negative List) (2018 Edition)
Scope of application		Foreign invested enterprises in the whole China	Foreign invested enterprises in free trade zone
Investment restriction category	Artistic-cultural Performance Group	Investment prohibition	Available
	Brokering agency of stage performances	Chinese party shall hold most shares	Not listed
	Breeding of new crops, seeds production	Chinese party shall hold most shares	Available
	Exploration and development of petroleum and natural gas (excluding coalbed gas, oil shale, oil sand, shale gas, etc.)	Joint venture and cooperation enterprises only	Not listed
Investment prohibited category	Artistic-cultural Performance Group	Available	N/A
Investment prohibited category	Smelting and processing of radioactive minerals as well as nuclear fuel production	Available	N/A

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