{"id":6597,"date":"2020-12-09T07:16:32","date_gmt":"2020-12-09T07:16:32","guid":{"rendered":"https:\/\/focus.cbbc.org\/?p=6597"},"modified":"2025-04-23T09:57:20","modified_gmt":"2025-04-23T09:57:20","slug":"china-business-guide-part-3-the-legal-system","status":"publish","type":"post","link":"https:\/\/focus.cbbc.org\/china-business-guide-part-3-the-legal-system\/","title":{"rendered":"China Business Guide Part 3: The legal system"},"content":{"rendered":"

In this six-part business guide to doing business in China produced by Hawksford<\/a>, we’ll give an overview of what you need to consider before entering the market. Ranging from localisation, to the legal and banking systems, to type of company set up. This series is a great jumping-off point to understand the many nuances of doing business with China.<\/h2>\n

Part 3: The legal system<\/span><\/h3>\n

The new Foreign Investment Law regime<\/strong><\/h3>\n

It has been over 30 years since China promulgated its first law on FDI (Foreign Direct Investment), the Sino-foreign Equity Joint Venture Enterprise Law, from which China has gradually established a complicated but comprehensive legal framework for foreign investment. The year 2019 arguably saw the most significant legislative move in this area in recent times, with the Foreign Investment Law (FIL) of the PRC enacted on 15 March 2019, coming into force on 1 January 2020. The FIL replaced the Sino-foreign Equity Joint Venture Enterprise Law, Sino-foreign Contractual Joint Venture Enterprise Law, and Wholly Foreign Invested Law, the three basic and most fundamental laws governing foreign investment.<\/p>\n

The FIL has led to great changes to the legal regime of forging investments, among others, demonstrating the Chinese government\u2019s determination to further open up to foreign investors. Highlights of the new law are summarised below.<\/p>\n

National treatment<\/strong><\/h3>\n

FIL replaced the case-by-case investment approval system with a system consisting of national treatment in conjunction with a \u2018negative list\u2019 for foreign investment. Under this system, except as required under the negative list, the competent PRC authorities are to treat foreign investors with at least the same degree of accommodation as Chinese investors.<\/p>\n

The negative list refers to a list of industry sectors in which foreign investment is restricted or prohibited. Foreign investment in industries not listed on the negative list is permitted. The latest version of the negative list, the Special Administrative Measures for Foreign Investment Access (Edition 2020), went into effect on July 23 this year. The negative list has been regularly updated over the years to liberalise investment in various industries.<\/p>\n

A more relaxed and efficient foreign investment administration system <\/strong><\/h3>\n

The case-by-case foreign investment approval requirement for FIEs has been replaced with an online reporting requirement with the Ministry of Commerce, greatly simplifying the administration of foreign investment. With this, most foreign-invested companies can directly apply for company establishment registration or other corporate changes, including equity transactions, by filing with the State Administration of Market Regulation (SAMR) or its local counterparts.<\/p>\n