Foreign business sceptical as China approves new investment law

China-US trade war: New Chinese law seeks to address concerns

Could China's Foreign Investment Law Appease Trump?

The measure is part of an investment law that aims to address complaints by the United States, Europe and other trading partners that China's system is rigged against foreign companies despite Beijing's commitments to treat competitors equally.

The new law clearly bodes well for foreign investors, especially in terms of market access and equal treatment, said Mario Ohoven, president of the German Association for Small and Medium-sized Businesses.

The legislation aims to address long-running grievances from foreign businesses, but the USA and European chambers of commerce have voiced concerns that they were not given enough time to give their input.

According to official state news agency Xinhua, the new Foreign Investment Law will create a "stable, transparent and predictable market environment for fair competition".

A draft was presented to the parliament last week but the latest revisions have not been made public since then.

Beijing sees the law as a tool to attract more foreign investment as its economy slows, with the government last week presenting a growth target of 6.0 to 6.5% this year, down from 6.6% growth in 2018.

"The newly signed Foreign Investment Law in China dramatically increases scope for foreign investors" Chinese M&A and investment strategies.

"Enforcement will be the key metric for evaluating success, but the business community has collectively advocated for years for the Chinese government to impose criminal penalties for infringement, we need to recognise this positive progress to that end". Despite substantial improvements, the Chinese leadership can be hard, but also foreign companies access to the market.

A lot of US lobbying interests is trying to urge Trump not to rush having a "vague deal" with China, knowing it fails to "resolve fundamental complaints" about its "unfair competitive practices".

"The vague language leaves much room for interpretation and makes compliance hard", he added.

These issues have been a sticking point in US-China (SPY) (FXI) trade talks.

There are also concerns that broad national security reviews could still leave foreign companies subject to overreaching regulators.

"What prosecutor is going to bring a case against a Communist Party official?" one person in the USA business community asked.

In a statement earlier this week, the American Chamber of Commerce in China welcomed the "legislative effort to improve the foreign investment climate".

"We are concerned, however, that such an important and potentially far-reaching piece of legislation will be enacted without extensive consultation and input from industry stakeholders", it said. Besides the NPC, the Chinese People's Political Consultative (CPPCC), a national advisory body, also concluded its session.

China has promised billions of dollars in tax cuts and infrastructure spending to help businesses and protect jobs, as economic momentum is expected to cool further due to softer domestic demand and the trade war with the United States. "I believe that this is also the expectation of the world", Li said.

"To want to artificially separate these two economies is unrealistic and impossible", Li said.

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