New foreign investment law: long overdue - Mark Schaub/Xu Ping

Xu Ping

Mark Schaub

The draft foreign investment law (FIL) is replacing the regulations from 1979. China has changed, and so a major overhaul of the law is long overdue, write lawyers Mark Schaub and Xu Ping in China Law Insight. They give an overview of the shortcomings of the current law, and the new features of the FIL. And it might only be the beginning.

Mark Schaub and Xu Ping:

The Foreign Investment Law, if promulgated in its current draft form, will fundamentally change the current foreign investment regulatory landscape. As such its implementation will rely on the formulation of relevant implementation rules as well as other complementary guidance, such as the Negative List, the national security review guidance and information reporting rules. While the circulation of the Draft FIL is an important first step in the context of the landmark reform, there is still a very long way to go in the establishment of a new foreign investment regime and the full implementation of the Foreign Investment Law. According to the Legislative Work Plan for the State Council in 2014, the amendment of the Three FIE Laws falls within the ‘research projects’ of 2014. MOFCOM, as the department responsible for drafting the Foreign Investment Law, has started to circulate the Draft FIL for public comments at the very start of 2015. This demonstrates the determination of the Chinese government to carry out reform. Upon expiration of the period soliciting public comments (approximately 1 month), MOFCOM will revise the Draft FIL on the basis of comments gathered from the public, and submit the revised draft to the standing meeting of the State Council for deliberation and then circulate an updated draft for the Standing Committee of the National People’s Congress to review. With the objective of establishing a “new open economy system” and along with the negotiation of Sino-US and Sino-EU bilateral investment agreements, we believe we are now at the dawn of the era of the new Foreign Investment Law.

More details on proposed institutional changes in China Law Insight.

Mark Schaub and Xu Ping are lawyers at King&Wood and Mallesons. They are also speakers at the China Speakers Bureau. Do you need them at your meeting or conference? Do get in touch or fill in our speakers´ request form.

Managing risks in China is a major undertaking. Are you looking for experts on risk management at the China Speakers Bureau? Do check our list here.  

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China plans sweeping foreign investment reforms - Xu Ping

Xu Ping

At the end of last year, China promised drastic reforms for aid foreign investments. Xu Ping, lawyer at King&Wood Mallesons calls those plans "sweeping" in a review of the "2014 Draft" that has been released, although many restrictions remain in place.

Xu Ping, on the pharmaceutical and medical sector:

We also see a considerable change in the health care industry under 2014 Draft. 2014 Draft categorizes certain pharmaceutical products plagued with overcapacity to the “restricted” category (such as multivitamins and calcium) and categorizes narcotics and “A” class psychoactive drugs as “permitted”, which allows market screening instead of pure administrative regulation in the manufacture of these types of drugs . 

On the other hand, under 2014 Draft, we notice the government imposes tighter control over the establishment of foreign invested medical institutions. Medical institution was once categorized as “restricted” industry under 2007 Catalogue, which only allowed foreign investment in the form of joint ventures. Then under the current 2011 Catalogue, medical institution was removed from the catalogue completely suggesting that foreign investors should be “permitted” to invest in medical institutions without restrictions. However, in practice, the establishment of wholly foreign-owned medical institutions remains difficult in China, and, only recently, FTZ begins to allow wholly foreign-owned medical institutions to be established. Since 2014 Draft moves medical institution back to the “restricted” category, it suggests that foreign investment in medical institution will remain restricted in the near foreseeable future.

More in the King&Wood Mallesons newsletter, on the plans for manufacturing, the auto industry, pharmaceutical an medical, telecom and internet, real estate, education and services.

Xu Ping is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers´request form.  

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Challenge: managing the Chinese clients' expectations - Xu Ping

She started her career in helping foreign firm to enter the Chinese market, but increasingly lawyer Xu Ping of King&Wood Mallesons, Asia's largest law firm, finds herself an dealing with Chinese clients, going international. Challenge their expectation is a major challenge, she tells in The Lawyer. 

The Lawyer:

It has been a busy time in the recent few months. My team has completed a number of deals, including: acquisition by Weichai Power of an equity stake in Kion Group (4 September 2012), which is the ever largest Chinese investment into Germany and was closed on December 28, 2012; divestment of commercial vehicle business by Dongfeng Limited which was signed on 26 January 2013; acquisition by Daimler AG of a strategic stake in Beijing BAIC Motor Corporation, which was signed on 1 February, 2013. 

What is the biggest challenge facing your market at the moment? 

While many Chinese clients are not yet experienced in managing cross-boarder M&A transactions, they are neither familiar with using external legal advisors. It could be challenging to manage the Chinese clients’ expectation and decision making along with the deal process. 

What has been the most significant development in your sector in recent years? 

The deal flow has changed significantly from one way traffic - inbound investment into China – into to both ways. Increasing number of leading Chinese companies are taking a global vision and looking at M&A opportunities globally. This has provided practitioners great opportunities for cross-border transactions.

More in the Lawyer.

Xu Ping is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers' request form.

What are the ambitions of Chinese internet company going global? The China Weekly Hangout discussed the issue in November 2012 with Steven Millward of Tech in Asia. Moderation: Fons Tuinstra, president of the China Speakers Bureau.

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