The foreign investment law took effective on Jan 1, 2020.On the same day, as a matching regulation to the foreign investment law, its implementing regulations will also take effect.

Shanghai Dongjin finds the below highlights on this implementing regulation.

1. Equally treat foreign-invested enterprises and domestic enterprises： The government and its relevant departments shall equally treat foreign-invested enterprises and domestic enterprises in funds arrangement, land supply, tax abatement or exemption, qualification licensing, standard setting, project application, human resource policies, and etc.
2. Enhancing transparency when making the policy: When issuing an administrative regulation, a departmental rule, or a regulatory document concerning foreign investment, or when the government and its relevant departments are drafting a law or a local regulation concerning foreign investment, the drafters shall, as applicable, seek comments from foreign-invested enterprises, the relevant chambers of commerce, and the relevant associations through various forms including inviting written comments and convening seminars, demonstrating meetings, or public hearings. The regulatory documents concerning foreign investment shall, in accordance with law, be timely publicized, and those not publicized shall not be cited as the basis for administration. A regulatory document closely related to the production and operation of foreign-invested enterprises shall, based on the actual situation, reasonably determine a time frame between its issuing and its implementation.
3. Improve the service ability and service level of foreign investment： The government and its various departments shall, through its official website or a nationally unified online government-service platform, specify the laws, regulations, departmental rules, regulatory documents, policy measures, and information on investment projects concerning foreign investment, and emphasize publicity and explanation thereof through various methods, to provide consultation, guidance, and other services for foreign investors and foreign-invested enterprises.
4. Foreign investment can enjoy preferential treatment according to law: A foreign investor or foreign-invested enterprise may, in accordance with law, administrative regulations, or the rules made by the State Council, enjoy a preferential treatment in areas such as finance, tax, financing, and land using. The local people’s governments above the county level may, in accordance with law, administrative regulations, and local regulations and within their delegated authority, take policy measures to promote and facilitate foreign investment, such as abatement of fees, guarantee of land-use quota, and provision of public services.
5. The collection conditions and compensation standards are specified：Under special circumstances where the State expropriates the investment of foreign investors for public interests, it shall be proceeded in accordance with the legal procedure and in a non-discriminatory manner, and compensation shall be made timely based on the market value of the expropriated investment.
6. Strengthen the protection of intellectual property：The State reinforces punishment on infringement of intellectual property rights. The administrative agencies shall establish and improve an internal administration system and adopt effective measures to protect the trade secrets owned by the foreign investors or foreign-invested enterprises which are obtained during performing of their duties.
7. Strengthen the local government's obligation to fulfill the promise: The content of such commitments shall comply with law and regulations. The local people’s governments at various levels and their relevant departments shall perform their commitments on policies made in accordance with law to foreign investors and foreign-invested enterprises, and the various contracts entered into therewith in accordance with law, and shall not breach or cancel such a contract on the ground that the administrative division is readjusted, the government officials are re-elected, the agencies or their functions are adjusted, or the relevant persons in charge are changed, etc. Where the commitment on policies or contract needs to be changed as required for social public interests, it shall be done in accordance with the legal authority and legal procedure, and the damage thus suffered by the a foreign investor or foreign-invested enterprise shall be fairly and reasonably compensated in a timely manner.
8. Improve the complaint mechanism: The local peoples’ governments above the county level and their relevant departments shall, according to the principles of publicity, transparency, efficiency, and facilitation, establish and improve a mechanism for foreign-invested enterprises to lodge complaints, in order to timely resolve the issues presented by foreign-invested enterprises or their investors, and to coordinate and improve the relevant policy measures. The rules for the complaining mechanism, the means for lodging complaints, and the time limit for resolving the complaints shall be publicized.
9. Clear the implementation mechanism of the negative list： Where a relevant department is performing its duties, it shall not grant permit, register the enterprise, or allow the relevant matters if the foreign investor proposes to invest in a sector listed in the negative list but the corresponding requirements are not satisfied; where an application concerns approval of an investment project involving fixed assets, the approval shall not be issued. The relevant department shall strengthen supervision and examination of the enforcement of the negative list;
10. Optimized the implementation system of administrative license：The relevant department in charge of implementing the licensing shall, through various means, optimize the service for the review and improve the efficiency of approval. It shall not impose discriminatory requirements on the foreign investor concerning the conditions for granting the license, application materials, review procedures, time limit, etc.
11. Make details on the foreign investment information reporting system: The content, coverage, frequency, and specific procedure of foreign investment information report are determined and announced by the department under the State Council in charge of commerce jointly with the department under the State Council in charge of market supervision and administration and the other relevant departments, based on the principles of actual necessity, high efficiency, and facilitation.
12. Transition period: A foreign-invested enterprise established before this Law takes effect under the Law of the People’s Republic of China on China-Foreign Equity Joint Ventures, the Law of the People’s Republic of China on Wholly Foreign-Owned Enterprises, or the Law of the People’s Republic of China on China-Foreign Contractual Joint Ventures may elect to transform its business form and organization structure, etc. according to the Corporation Law of the People’s Republic of China and the Law of the People’s Republic of China on Partnership Enterprises and file for registration of modification of its business form within five years since this Law takes effect; it may also maintain its original business form or organization structures.
13. The investment of overseas Chinese investors in Hong Kong, Macao and Taiwan city shall be governed by the foreign investment law and its implementing regulations;
14. Foreign investors may jointly invest in China with Chinese individuals.
15. Legal liability of the government: The government, its relevant departments, and the staff thereof, shall assume legal liability in accordance with law and administrative regulations if they have conducted any of the following activities:(1) making or implementing a policy which does not equally treat foreign-invested enterprises and domestic enterprises in compliance with law;(2) illegally restricting foreign-invested enterprises from equally participating in the standard setting and review, or imposing a technology requirement on foreign-invested enterprises which is higher than the mandatory standard;(3) illegally restricting foreign investors from remitting funds inbound or outbound;(4) failure to honor a commitment on policies made in accordance with law to a foreign investor or foreign-invested enterprise or failure to perform the various contracts legally entered into therewith, making a commitment on policies in exceeding its duly delegated authority, or making a commitment on policies the content of which does not comply with law or administrative regulations.

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Mr. Mike Chang

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