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China Commentary 2-2015

Draft Foreign Investment Law: China’s Reform on Regime of Foreign Investment

03/09/2015
Commentaries

The PRC Ministry of Commerce (“MOFCOM”) released recently a draft of the Foreign Investment Law (“Draft”) for public comments. The Draft is aiming to encourage and liberalize the foreign investment into China, and it is also designed to replace the current legal framework of foreign-invested enterprises (“FIEs”) in China applied since 1979, which includes the Sino-Foreign Equity Joint Venture Law, the Sino-foreign Cooperative Joint Venture Law, and the Law on Wholly Foreign Owned Enterprises, as well as the corresponding administrative rules and regulations in relation to the FIEs (collectively, “FIE Laws”) by a uniformed law.

1. Key features of the draft

  • 1.1 A “substance over form” principle
  • 1.2 The Negative List approach
  • 1.3 The information reporting system
  • 1.4 National security review

2. Impact on foreign investment

  • 2.1 Impact on existing FIEs
  • 2.2 Impact on VIE structure

3. Outlook of the PRC foreign investment framework

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