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China's Foreign Investment Law Promulgated with Potential Standards-Related Opportunities

Law Becomes Effective 1/1/2020

04/11/2019

On March 15, 2019, the National People's Congress promulgated the Foreign Investment Law of the People's Republic of China, which will take effect on January 1, 2020. The newly enacted Foreign Investment Law, which is composed of 6 chapters and 42 articles, is the new guidance document that governs the activities of all individual foreign investors and foreign-invested enterprises (FIEs), which include both wholly foreign-owned enterprises (WFOEs) and Sino-foreign joint ventures (JVs) foreign investments in China. The new document is a significantly shorter version of the initial draft, which was released in 2015 but then quickly sidelined.

More information on the Foreign Investment Law is available here in Chinese. An unofficial English translation of the Foreign Investment Law is also available.

The Law contains a particular provision to encourage the participation of foreign-invested businesses in the formulation of standards in China. This gesture also coincides with China's pro-business agenda and policies. For example, the State Council General Office released new opinions on improving businesses' ability to provide inputs to the policymaking process. The opinions document make it clear that Chinese regulators would continuously seek opinions from industry associations, and small and private businesses. While the Chinese government makes a genuine push for a modern and open governance system, there is a long way to go, and the international community has been concerned with the slow progress toward improvement and the outstanding issues that have not been fully addressed in China's reform activities.

The following key provisions to the Foreign Investment Law may be of interest for the standards community:

Article 15 suggests that foreign-invested businesses shall equally participate in standards formulation process, and compulsory standards formulated by the State shall be equally applied to foreign-funded enterprises.

Currently, the participation of foreign-invested enterprises in the standards formulation process is not consistent, especially at the drafting stage. It is unclear how China will govern the standards development process with respect to proposed changes.

Article 22 suggests that China shall protect the intellectual property rights of foreign investors and foreign-funded enterprises. The technological cooperations shall be determined by all investment parties upon negotiation. It further indicates that no administrative organ or functionary working therein shall force the transfer of technologies by administrative means.

Although the law prohibits forced technology transfer through administrative measures, it remains to be seen what implementing actions will be taken to enforce the law as it is written.

While the newly promulgated law signals China's continued commitment to open up its market, ANSI, along with the foreign business community, is looking forward to the future rollout of specific implementation measures that will strengthen the market access and protection of foreign companies’ rights in China.

For more information on ANSI's China Program, please visit www.standardsportal.org.

Keywords

China    FIEs    foreign investment    formulation    IP    JVs    reform activities    standards    WFOEs   
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