China’s new foreign investment law has been officially passed and will come into effect on January 1, 2020

On March 15, 2019, the National People’s Congress passed the Foreign Investment Law of the People’s Republic of China (the Foreign Investment Law) after several rounds of public consultation. The new law, which will come into effect on January 1, 2020, constitutes a fundamental framework for foreign investment in China, covering market access, promotion, protection, and administration, and, as from its effective date, will supersede existing legislation governing foreign investment, i.e., the Sino-Foreign Joint-Venture Enterprise Law, Sino-Foreign Cooperative Enterprise Law, and Foreign-Invested Enterprise Law (together, the FIE Laws).2019年3月15日，在经过广泛征求意见和多次审议后，十三届全国人大二次会议通过了《中华人民共和国外商投资法》（“外商投资法”）。外商投资法自2020年1月1日起施行，届时将取代中国现行“外资三法”（即《中外合资经营企业法》、《中外合作经营企业法》、及《外资企业法》，“外资三法”），成为中国外商投资的准入、促进、保护、管理等领域的基本法律制度。

The Foreign Investment Law comprises six chapters, made up of 42 articles that cover general provisions, investment promotion, investment protection, investment administration, legal liability, and supplementary provisions. It establishes the following administration systems and incentive measures for foreign investment:外商投资法分为六章，共四十二条，包括了总则、投资促进、投资保护、投资管理、法律责任、附则，建立了如下外商投资相关管理制度和促进措施：

National treatment and negative list administration systems国民待遇与负面清单管理制度

During the investment entry period, foreign investors (including natural persons, business entities, and other organizations from a foreign country) and their investments in sectors that are not on the negative list (which is an official list of specific sectors that are subject to special administrative measures on foreign investment entry) are accorded treatment that is no less favorable than that accorded to domestic investors and their investments.在投资准入阶段，外国投资者（包括外国的自然人、企业或者其他组织）及其投资，对在负面清单（即国家规定在特定领域对外商投资实施的准入特别管理措施）之外的，被给予不低于中国本国投资者及其投资的待遇。The current negative list is the Special Administrative Measures on Foreign Investment Entry (Negative List) (2018 edition) published by the National Development and Reform Commission and the Ministry of Commerce, which came into effect on July 30, 2018 (the 2018 Negative List). The negative list administration system mainly provides that:

目前执行的负面清单为国家发展和改革委员会与商务部公布并于2018年7月30日起实施的《外商投资准入特别管理措施（负面清单）（2018年版）》（“2018负面清单”）。负面清单管理制度主要内容如下：

Foreign investors cannot invest in those sectors on the negative list in which foreign investment is prohibited (e.g., according to the 2018 Negative List, foreign investors are prohibited from investing industries such as social surveys, compulsory education institutions, news agencies, and movie production companies).外商投资准入负面清单规定禁止投资的领域（例如，2018负面清单中，外商被禁止投资社会调查、义务教育机构、新闻机构、电影制作公司等行业领域），外国投资者不得投资。

Foreign investors investing in sectors on the negative list in which foreign investment is restricted must satisfy the requirements provided in the negative list (e.g., according to the 2018 Negative List, foreign investment in industries such as basic telecommunications, domestic waterway transportation, and publication printing are subject to the restriction of the Chinese party being the controlling shareholder).外商投资准入负面清单规定限制投资的领域，外国投资者进行投资应当符合负面清单规定的条件（例如，2018负面清单中，外商投资基础电信业务、国内水上运输公司、出版物印刷等行业领域，需中方控股）。

Foreign investments in sectors not on the negative list must be administered on the basis that domestic and foreign investments should be treated alike.外商投资准入负面清单以外的领域，按照内外资一致的原则实施管理。

Foreign investment information reporting system外商投资信息报告制度

The state is to establish a system for reporting details of foreign investments. Foreign investors or foreign-invested enterprises shall, through the enterprise registration system and the enterprise credit information disclosure system, report details of investments to the authority responsible for commerce matters.国家建立外商投资信息报告制度。外国投资者或者外商投资企业应当通过企业登记系统以及企业信用信息公示系统向商务主管部门报送投资信息。

Foreign investment security review system外商投资安全审查制度

The Foreign Investment Law reiterates the requirement to establish a security review system, which was initially provided under the Notice on Establishing a Security Review System for Foreign Investors to Acquire Domestic Enterprises issued by the General Office of the State Council of China in 2011 (known as Circular 6). Circular 6 provides specific requirements on the scope, content, work mechanism, and procedures regarding the security review, while only one single article under the Foreign Investment Law says that foreign investments that affect or might affect national security shall be subject to a security review and the decision made in accordance with the law is final. It remains to be seen if the detailed provisions under Circular 6 will be replaced by the Foreign Investment Law’s implementation rules, still to be formulated and issued in the future.外商投资法重申了2011年《国务院办公厅关于建立外国投资者并购境内企业安全审查制度的通知》（“6号通知”）项下关于建立外商投资安全审查制度的要求。6号通知对安全审查的范围、内容、工作机制、以及程序等提出了详细要求，但是外商投资法项下仅有一条相关条款，规定对影响或者可能影响国家安全的外商投资应进行安全审查，并且依法作出的安全审查决定为最终决定。6号通知项下就安全审查制度的具体规定是否会被将来制定发布的外商投资法的配套实施规范代替，目前尚未明确。

Incentives of foreign investment外商投资促进措施

Foreign-invested enterprises will be treated the same as domestic enterprises, in accordance with the law, in relation to the various state policies supporting the development of enterprises, participation in standard-setting, the application of mandatory standards, and the state procurement of products and services provided by foreign-invested enterprises within China.外商投资企业依法平等适用国家支持企业发展的各项政策，平等参与标准制定工作，平等适用强制性标准，并且外商投资企业在中国境内生产的产品及提供的服务在政府采购活动中被平等对待。The Foreign Investment Law also confirmed that foreign-invested enterprises may raise financing in China through the public offering of shares or issuance of corporate bonds. Furthermore, foreign investors may, in accordance with law, freely remit profits, capital gains, royalties from intellectual property rights, lawfully obtained compensation and the proceeds of liquidation, out of China.

外商投资法亦确认外商投资企业可以依法通过公开发行股票、公司债券等证券和其他方式进行融资。另外，外国投资者可依法以人民币或者外汇自由汇出其在中国境内的利润、资本收益、知识产权许可使用费、依法获得的补偿或者赔偿、清算所得等。

Reed Smith Observations 礼德观察

The Foreign Investment Law is expected to bring about significant changes in future foreign investment transactions, and its promulgation marks the beginning of a long-term reform of China’s system for administering foreign investment. However, compared with the current FIE Laws, the Foreign Investment Law only outlines principles and contains somewhat vague provisions. Many features, such as the detailed registration, filing, and reporting procedures for foreign-invested enterprises, remain to be further specified in implementation rules and other ancillary regulations, which have yet to be formulated and issued by relevant authorities. Foreign investors doing business in China are encouraged to participate when the Chinese government seeks public comments on the draft implementation rules and to keep abreast of the new developments in laws and regulations.外商投资法对将来中国的外商投资交易将带来巨大的变化，并且它的颁布预示了中国外商投资管理制度的长期改革的开始。然而，与现行的外资三法相比，外商投资法仅规定了原则性且模糊的条款，还有很多问题（如外商投资企业的登记/备案/报告的具体程序）还留待有关机关制定公布相关实施细则及其他配套法规加以明确。在中国开展业务的外国投资者可以积极参与相关实施细则草案公开征求意见的环节，密切关注相关法律法规的最新发展。Although many details of the implementation of the Foreign Investment Law are yet to be specified in the future ancillary regulations, it is certain that the special corporate governance rules regulating foreign-invested enterprises, and which are provided in the current FIE Laws, will be replaced by general rules in the Company Law and the Partnership Enterprise Law. For instance, the highest authority in a Sino-foreign joint venture will be the shareholders’ meeting, rather than the board of directors. As such, existing foreign-invested enterprises in China should consider amending their articles of association or other organizational documents to bring them into alignment with their actual circumstances as soon as possible after the Foreign Investment Law comes into effect (e.g., joint venture agreements and the articles of associations of Sino-foreign joint ventures should be adjusted to make the shareholders’ meeting the highest authority within the company), in order to comply fully with the requirements under the Foreign Investment Law.

尽管很多外商投资法实施细节尚待在稍后出台的配套法规中进一步确定，但可以确定的是随着外资三法的废止，其中关于外商投资企业公司治理等方面的特殊规定也将一并被《公司法》与《合伙企业法》中的一般性规定所替代。例如，中外合资公司的最高权力机构将由董事会变更为股东会。有鉴于此，现有的外商投资企业应根据自身的实际情况，在外商投资法正式施行后尽快修订公司章程或其他公司组织文件（例如，就中外合资公司，需调整其合资合同及公司章程以明确股东会为公司最高权力机构），以使其符合外商投资法的相关规定。

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