China's New Foreign Investment Law: Important News for Foreign Investors in China.
China has adopted a new law which aims to establish a more confident environment to encourage foreign investment. This new Foreign Investment Law will take effect on January 1, 2020 with a five-year transition period.
It will repeal three current laws (the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Contractual Joint Ventures and the Wholly Foreign Owned Enterprises Law) which have shaped the framework that governs Sino-foreign joint ventures and wholly foreign owned enterprise (WFOE) up to now.
If your company has an entity in China, this new law is certainly relevant for your business.
Highlights of the new law that may interest your business:
Protection of rights for foreign investors including intellectual property related issues.
For the very first time, China allows foreign-invested companies to raise funds by means of public offering shares (IPO), corporate bonds or other securities.
Foreign entities may freely remittance profits, capital gains, royalties or any other types of income in all currencies (subject to Chinese regulations).
China to adopt a national security review for foreign investment similar to the U.S.
Considering the new law being much briefer and concise than the current laws, new regulations are also expected to fill in the gap in the near future. Due to this major change in the Chinese Foreign Investment Law regime, I encourage you to contact your legal counsel in order to properly prepare all necessary legal adjustments in your corporate documents. Please do not hesitate to contact us if you require further information or assistance at email@example.com.
* Amit Ben-Yehoshua is licensed to practice law in Israel and California and holds a Master of Law Degree in Chinese Law from Tsinghua University of Beijing.
Amit is one of the co-founders of the Israeli Chamber of Commerce in China and served as the Vice Chair of the China Committee of the American Bar Association.