Why this is important to Wisconsin businesses: China also made recent moves to better protect intellectual property.
In October 2019, a joint statement was released that a consensus has been reached involving key supervisory systems for U.S. imports of Chinese cooked poultry and catfish products and China's removal of the import ban on U.S. poultry products. Although trade frictions between the U.S. and China still exist, this important agreement is a positive sign.
With that being said, China’s new Foreign Investment Law, consisting of six chapters and 42 articles, is set to take effect on Jan. 1, 2020. With this law coming into effect, the Law on Chinese-Foreign Equity Joint Ventures, the Law on Wholly Foreign-owned Enterprises and the Law on Chinese-Foreign Contractual Joint Ventures will expire. Foreign companies established based on these three laws will have a five-year buffer period.
Two terms are the most important keywords in understanding this law: equality and legality. First of all, foreign investments will now be regulated the same way as domestic ones—that is, no longer subject to prior approval, as long as they do not appear on a clearly defined negative list. Currently, there are two negative lists that are applicable to different areas in the country—the Free Trade Zone negative list (full list in Chinese available here) and the national negative list (full list in Chinese available here). Other benefits of the new status include equal access to supports, equal voice in rule-making, equal bidding in procurement and equal opportunity of fund-raising.
The rule of law will also be standardized under the new changes. Intellectual property is one of the core issues in the U.S.-China trade disputes. The law has made it a legal duty of the Chinese government to protect not just foreign investors’ intellectual property rights but also their confidential trade secrets. Article 22 stipulates that “the State shall protect the intellectual property rights of foreign investors and foreign-funded enterprises and protect the legitimate rights and interests of holders of intellectual property rights and relevant right holders; in case of any infringement of intellectual property right, legal liability shall be investigated strictly in accordance with the law. During the process of foreign investment, the state shall encourage technology cooperation on the basis of free will and business rules. Conditions for technology cooperation shall be determined by all investment parties upon negotiation under the principle of equity. No administrative department or its staff member shall force any transfer of technology by administrative means.”
He Lifeng, head of the National Development and Reform Commission, said the passage of this law is evidence of continuous improvement in China’s business environment. There is widespread optimism that this law will further boost the opening of the Chinese market.