PRC Foreign Investment Law

(Adopted at the 2nd Session of the 13th National People's Congress on March 15, 2019 and effective as of January 1, 2020.)

 

PRC President's Order (No.26 of the 13th NPC)

 

 

Part One: General Provisions

 

Article 1:        This Law has been formulated pursuant to the Constitution in order to further expand opening to the outside world, actively promote foreign investment, protect lawful rights and interests relating to foreign investment, regulate the administration of foreign investment, drive the realization of a new situation of comprehensive opening, and promote the healthy development of the socialist market economy.

 

Article 2:        This Law shall govern foreign investment in the People's Republic of China (in China).

 

For the purposes of this Law, the term "foreign investment" means the foreign investment activities carried out directly or indirectly by foreign natural persons, enterprises or other organizations (Foreign Investors) in China, the same including the following:

 

(1)   the establishment of a foreign-invested enterprise in China by a Foreign Investor alone or in concert with other investors;

 

(2)   the securing by a Foreign Investor of shares of, equity in, shares in the property of, or other similar rights and interests in, enterprises in China;

 

(3)   the investment in a new project in China by a Foreign Investor alone or in concert with other investors; and

 

(4)   investment in other manner as specified by laws, administrative regulations or the State Council.

 

For the purposes of this Law, the term "foreign-invested enterprise" (FIE) means an enterprise that is wholly or partially invested by (a) Foreign Investor(s) and that is registered and established in China in accordance with Chinese laws.

 

Article 3:        The state adheres to a fundamental state policy of opening to the outside world and encourages Foreign Investors to invest in China in accordance with the law.

 

The state implements a high-level policy of liberal and convenient investment, will establish and improve a foreign investment promotion mechanism and engender a stable, transparent and predictable market environment that is characterized by fair competition.

 

Article 4:        The state subjects foreign investment to a system of administration by means of pre-access national treatment plus a negative list.

 

For the purposes of the preceding paragraph, the term "pre-access national treatment" means that, at the investment access stage, Foreign Investors and their investments are accorded treatment no less favorable than that accorded Chinese investors and their investments; the term "negative list" means the special administrative measures for access to which the state specifies that foreign investment in specific sectors will be subjected. The state accords national treatment to foreign investments that are not included in the negative list.

 

The negative list shall be issued, or its issuance shall be approved, by the State Council.

 

Where an international treaty or agreement concluded by the People's Republic of China or to which it is party accords more favorable access treatment to Foreign Investors, matters may be handled in accordance with relevant provisions thereof.

 

Article 5:        The state protects the investments, returns, and other lawful rights and interests in China of Foreign Investors in accordance with the law.

 

Article 6:        Foreign Investors and FIEs that conduct investment activities in China shall comply with Chinese laws and regulations, and may not jeopardize national security or prejudice the public interest.

 

Article 7:        The State Council departments in charge of commerce and investment shall carry out the work of promotion, protection and administration of foreign investment in line with their division of responsibilities; and other relevant departments of the State Council shall be responsible for work related to the promotion, protection and administration of foreign investment that falls within their respective purviews.

 

Relevant departments of local people's governments at the county level and above shall carry out the work of promotion, protection and administration of foreign investment in accordance with laws and regulations, and in line with their division of responsibilities determined by the people's government at the same level.

 

Article 8:        The employees and workers of an FIE may establish a labor union, carry out union activities, and safeguard the lawful rights and interests of employees and workers in accordance with the law. An FIE shall provide the necessary activity conditions for its labor union.

 

Part Two: Investment Promotion

 

Article 9:        The various policies of the state supporting the development of enterprises shall apply equally to FIEs in accordance with the law.

 

Article 10:      When formulating laws, regulations and rules relating to foreign investment, appropriate means shall be taken to seek the opinions and suggestions of FIEs.

 

Regulatory documents, judicial documents, etc. relating to foreign investment shall be published in a timely manner in accordance with the law.

 

Article 11:      The state shall establish and improve a foreign investment service system to provide to Foreign Investors and FIEs advice and services with respect to laws, regulations, policy measures, investment project information, etc.

 

Article 12:      The state shall establish multilateral and bilateral investment promotion cooperation mechanisms with other countries/regions and international organizations to strengthen international exchange and cooperation in the investment field.

 

Article 13:      The state shall, as required, establish special economic areas or, in certain regions, implement experimental foreign investment policy measures to promote foreign investment and expand the opening to the outside world.

 

Article 14:      The state shall, as required for the development of the national economy and society, encourage and guide Foreign Investors to invest in specific industries, sectors and regions. Foreign Investors and FIEs shall be eligible for favorable treatment in accordance with laws, administrative regulations or State Council provisions.

 

Article 15:      The state shall ensure that FIEs may participate in accordance with the law in the formulation of standards on an equal footing, and strengthen the publication of information on, and public scrutiny of, the formulation of standards.

 

The mandatory standards formulated by the state shall apply equally to FIEs.

 

Article 16:      The state shall ensure that FIEs may participate in government procurement activities through fair competition in accordance with the law. Governments, in their procurement, shall, in accordance with the law, treat the products produced and services provided in China by FIEs with equal standing.

 

Article 17: FIEs may lawfully seek financing through the public offering of shares, corporate bonds or other such securities, as well as by other means.

 

Article 18:      Local people's governments at the county level and above may, to the extent of their statutory authority, formulate policy measures for the promotion and facilitation of foreign investment in accordance with laws, administrative regulations and local regulations.

 

Article 19:      People's governments at every level and their relevant departments shall simplify handling procedures, enhance handling efficiency, optimize government services and further enhance the level of foreign investment services in accordance with the principles of convenience, efficiency and transparency.

 

Relevant competent departments shall compile and publish foreign investment guidelines to provide services and convenience to Foreign Investors and FIEs.

 

Part Three: Investment Protection

 

Article 20:      The state shall not subject the investments of Foreign Investors to expropriation.

 

Under special circumstances, the state may, in the interest of the public, subject the investment of a Foreign Investor to expropriation or requisitioning in accordance with the law. Such expropriation or requisitioning shall be carried out by the statutory procedure, and fair and reasonable compensation shall be paid in a timely manner.

 

Article 21:      The capital contribution, profits, capital returns, asset disposal proceeds, intellectual property royalties, lawfully obtained indemnities or compensation, liquidation proceeds, etc. in China of a Foreign Investor may be freely remitted inward and outward in renminbi or foreign exchange in accordance with the law.

 

Article 22:      The state protects the intellectual property of Foreign Investors and FIEs, and protects the lawful rights and interests of intellectual property rights holders and neighboring rights holders; and pursues legal liability for infringement of intellectual property rights in strict accordance with the law.

 

The state encourages technical cooperation in the course of foreign investment based on the principle of free will and business rules. The conditions of technical cooperation shall be determined by the parties to the investment through consultations conducted on the basis of equality in accordance with the principle of fairness. Administrative authorities and their working personnel may not use administrative means to compel technology transfer.

 

Article 23:      Administrative authorities and their working personnel shall keep confidential, in accordance with the law, the trade secrets of Foreign Investors and FIEs to which they are privy in the course of performing their duties, and may not disclose or illegally provide the same to third parties.

 

Article 24:      The regulatory documents relating to foreign investment formulated by people's governments at every level and their relevant departments shall comply with laws and regulations. Where there is no law or set of administrative regulations as a basis, such a regulatory document may not impair the lawful rights and interests of FIEs or increase their obligations, may not set conditions for entry into or exit from the market and may not interfere with the normal production and operating activities of FIEs.

 

Article 25:      Local people's governments at every level and their relevant departments shall perform their policy undertakings given in accordance with the law to Foreign Investors and FIEs and various types of contracts entered into with them in accordance with the law.

 

If a policy undertaking or the provisions of a contract need to be modified in the interests of the state or the public, the same shall be carried out with the statutory authority and by the statutory procedure, and compensation shall be paid in accordance with the law to Foreign Investors and FIEs for the losses incurred by them as a result thereof.

 

Article 26:      The state shall establish an FIE complaint mechanism, deal with issues reflected by FIEs or their investors in a timely manner and coordinate the improvement of relevant policy measures.

 

If an FIE or its investors deem that the administrative act of an administrative authority or its working personnel infringes upon its lawful rights and interests, it may apply for reconciliation and resolution through the FIE complaint mechanism.

 

If an FIE or its investors deem that an administrative act by an administrative authority or its working personnel infringes upon its or their lawful rights and interests, it or they may, in addition to applying for reconciliation and resolution through the FIE complaint mechanism specified in the preceding paragraph, apply for administrative reconsideration or institute an administrative action in accordance with the law.

 

Article 27:      FIEs may lawfully establish and voluntarily join chambers of commerce and associations. A chamber of commerce or association shall carry on its relevant activities in accordance with laws, regulations and its charter, and safeguard the lawful rights and interests of its members.

 

Part Four: Investment Administration

 

Article 28:      Foreign Investors may not invest in sectors the investment in which is prohibited as specified by the negative list for access by Foreign Investors.

 

A Foreign Investor investing in a sector the investment in which is restricted by the negative list for access by Foreign Investors shall satisfy the conditions specified in the negative list.

 

Administration of sectors other than those specified in the negative list for access by Foreign Investors shall be carried out in line with the principle of equality between domestic and foreign investment.

 

Article 29:      Where investment project approval or record filing needs to be carried out for a foreign investment, matters shall be handled in accordance with relevant state provisions.

 

Article 30:      Where a Foreign Investor invests in an industry or sector for which the securing of permission is required according to law, it shall carry out the relevant permission procedures in accordance with the law.

 

The relevant competent department shall review the Foreign Investor's permission application on conditions and by a procedure equivalent to that for domestic investments, unless otherwise provided in laws or administrative regulations.

 

Article 31:      The organizational form, organizational bodies and the rules for the activities of an FIE shall be governed by laws such as the PRC Company Law and the PRC Partnership Law.

 

Article 32:      In carrying on its production and operating activities, an FIE shall comply with the provisions on labor protection and social insurance of laws and administrative regulations, carry out tax, accounting, foreign exchange and other such matters in accordance with laws, administrative regulations and relevant state provisions and submit to monitoring inspections conducted by relevant competent departments in accordance with the law.

 

Article 33:      Where a Foreign Investor acquires an enterprise in China or otherwise participates in a concentration of business operators, it shall submit to a review of the concentration of business operators in accordance with the PRC Anti-monopoly Law.

 

Article 34:      The state shall establish a foreign investment information reporting system. A Foreign Investor or FIE shall submit investment information to the competent commerce department by means of the enterprise registration system and enterprise integrity information publication system.

 

The substance and scope of foreign investment information reports shall be determined based on the principle of genuine necessity. Where investment information can be obtained through information sharing between departments, the submission thereof may not be requested again.

 

Article 35:      The state shall establish a foreign investment security review system, and conduct security reviews of foreign investments that impact or could impact national security.

 

Security review decisions rendered in accordance with the law are final.

 

Part Five: Legal Liability

 

Article 36:      If a Foreign Investor invests in a sector the investment in which is prohibited by the negative list for access by Foreign Investors, the relevant competent department shall order it to halt the investment activities, dispose of the shares/assets or take other necessary measures within a specified period of time, and restore the situation to the pre-investment state. If there is illegal income, the same shall be confiscated.

 

If the investment activities of a Foreign Investor violate the restrictive special administrative measures for access specified in the negative list for access by Foreign Investors, the relevant competent department shall order rectification within a specified period of time and take necessary measures to satisfy the requirements of the special administrative measures for access. If the same is not rectified within the specified of time, the matter shall be dealt with in accordance with the preceding paragraph.

 

If its investment activities violate the negative list for access by Foreign Investors, a Foreign Investor shall bear the attendant legal liability in accordance with the law, in addition to being dealt with in accordance with the preceding two paragraphs.

 

Article 37:      If a Foreign Investor or FIE violates this Law by failing to submit investment information in accordance with the requirements of the foreign investment information reporting system, the competent commerce department shall order it to rectify the matter within a specified period of time. If it fails to do so, it shall be fined not less than Rmb100,000 and not more than Rmb500,000.

 

Article 38:      A violation of laws or regulations by a Foreign Investor or FIE shall be investigated and dealt with by the relevant department in accordance with the law and the same shall be entered into the integrity information system in accordance with relevant state provisions.

 

Article 39:      If a member of the working personnel of an administrative authority abuses his/her authority, is derelict in his/her duties, practices favoritism, commits another irregularity or discloses or illegally provides trade secrets to which he/she was privy in the course of performing his/her duties to a third party in the course of foreign investment promotion, protection or administration work, he/she shall be disciplined in accordance with the law. If a criminal offense is constituted, his/her criminal liability shall be pursued in accordance with the law.

 

Part Six: Supplementary Provisions

 

Article 40:      If any country or region takes discriminatory prohibitive, restrictive or other similar measures against the People's Republic of China with respect to investment, the People's Republic of China may take corresponding measures against such country or region based on the actual circumstances.

 

Article 41:      With respect to the administration of the investment in China by a Foreign Investor in the banking industry, securities industry, insurance industry or other finance industry or investment in a financial market, such as the securities market or foreign exchange market, if the state provides otherwise, such provisions shall be complied with.

 

Article 42:      This Law shall be effective as of January 1, 2020. The PRC Sino-foreign Equity Joint Venture Law, the PRC Wholly Foreign-owned Enterprise Law and the PRC Sino-foreign Cooperative Joint Venture Law shall be repealed simultaneously.

 

FIEs established in accordance with the PRC Sino-foreign Equity Joint Venture Law, the PRC Wholly Foreign-owned Enterprise Law and the PRC Sino-foreign Cooperative Joint Venture Law before the implementation hereof may continue to retain their original enterprise organizational form, etc. for five years after the implementation hereof. The specific implementing measures shall be specified by the State Council.