Foreign Investment Law of the People’s Republic of China

Effective Date: 01-01-2020

Source: State Council website

Chinese Title: 中华人民共和国外商投资法

Presidential decree No.26

The Foreign Investment Law of the People’s Republic of China, adopted at the Second Session of the Thirteen National People’s Congress of the People’s Republic of China on March 15, 2019, is hereby promulgated, effective as of January 1, 2020.

Xi Jinping

President of the People’s Republic of China

March 15, 2019

(Adopted at the Second Session of the Thirteen National People’s Congress on March 15, 2019)

Chapter I General Provisions

Article 1 The present Law is enacted in accordance with the Constitution, in order to open wider to the outside world, actively promote foreign investment, protect the legitimate rights and interests of foreign investors, regulate the administration of foreign investment, impel the formation of a new pattern of comprehensive opening-up and facilitate the sound development of the socialist market economy.

Article 2 Any foreign investment within the territory of the People’s Republic of China (“within the territory of China”) is subject to the present Law.For the purpose of the present Law, foreign investment refers to any investment activity directly or indirectly carried out by foreign natural persons, enterprises or other organizations (hereinafter “foreign investors”), including the following circumstances:

1. a foreign investor establishes a foreign-funded enterprise within the territory of China, either alone or together with any other investor;

2. a foreign investor acquires shares, equities, property shares or any other similar rights and interests of an enterprise within the territory of China;

3. a foreign investor invests in any new project within the territory of China, either alone or together with any other investor; and

4. a foreign investor invests in any other way stipulated under laws, administrative regulations or provisions of the State Council.

For the purpose of the present Law, a foreign-funded enterprise refers to an enterprise incorporated under Chinese laws within the territory of China and with all or part of its investment from a foreign investor.

Article 3 The State adheres to the basic state policy on opening-up and encourages foreign investors to invest within the territory of China according to law.The State implements policies of high-level investment liberalization and convenience, establishes and improves a foreign investment promotion mechanism, and creates a stable, transparent and predictable market environment featuring fair competition.

Article 4 The State adopts the management system of pre-establishment national treatment and negative list for foreign investment.For the purpose of the preceding paragraph, the pre-establishment national treatment refers to granting to foreign investors and their investments, in the stage of investment access, the treatment no less favorable than that granted to domestic investors and their investments; the negative list refers to special administrative measures for access of foreign investment in specific fields as stipulated by the State. The State will give national treatment to foreign investments outside the negative list.

The negative list will be released by or upon approval by the State Council.

If more preferential treatment for access of foreign investors is provided under international treaties or agreements governing foreign investment that the People’s Republic of China concludes or accedes, such provisions may apply.

Article 5 The State protects foreign investors’ investment, earnings and other legitimate rights and interests within the territory of China pursuant to the present Law.

Article 6 Foreign investors and foreign-funded enterprises which carry out investment activities within the territory of China shall observe Chinese laws and regulations, and shall not jeopardize China’s security or damage public interests.

Article 7 The competent department for commerce and the competent department for investment under the State Council shall, as per the division of duties, push forward, protect and manage foreign investment, while other relevant departments under the State Council shall take charge of the promotion, protection and management of foreign investment ex officio.The relevant department under a local people’s government at or above the county level shall promote, protect and manage foreign investment according to laws and regulations and the division of duties determined by the people’s government at the same level.

Article 8 The employees of a foreign-funded enterprise shall, according to the present Law, establish a trade union and carry out trade union activities to maintain their legitimate rights and interests. The foreign-funded enterprise shall provide its trade union with necessary conditions to carry out activities.

Chapter II Investment Promotion

Article 9 The State’s various policies in support of enterprise development shall apply equally to foreign-funded enterprises according to law.

Article 10 Opinions and suggestions of foreign-funded enterprises shall be solicited by appropriate means in the enacting of laws, regulations and rules relating to foreign investment.Normative documents and judgment instruments relating to foreign investment shall be timely promulgated according to Law.

Article 11 The State establishes a sound foreign investment service system to provide foreign investors and foreign-funded enterprises with consultation and services in respect of laws and regulations, policies and measures, investment project information and so on.

Article 12 The State establishes multilateral and bilateral cooperation mechanisms for investment promotion with other countries/regions and international organizations, so as to reinforce international communications and cooperation in the investment field.

Article 13 The State may, as needed, establish special economic zones, or implement experimental policies and measures for foreign investment in some areas, in a bid to promote foreign investment and expand opening-up.

Article 14 As required for national economic and social development, the State encourages and guides foreign investors to invest in specific industries, fields and regions. Foreign investors and foreign-funded enterprises may enjoy preferential treatments according to laws, administrative regulations or provisions of the State Council.

Article 15 The State protects the right of foreign-funded enterprises to equally participate in the setting of standards, and reinforces the information disclosure and social supervision for the setting of standards.The compulsory standards set by the State shall equally apply to foreign-funded enterprises.

Article 16 The State protects foreign-funded enterprises’ participation in government procurement activities through fair competition. Products produced and services provided by foreign-funded enterprises within the territory of China shall be equally treated in government procurement according to law.

Article 17 Foreign-funded enterprises may raise funds by means of public offering of shares, corporate bonds or other securities and so on.

Article 18 A local people’s government at or above the county level may, according to laws, administrative regulations and local rules, develop foreign investment promotion and facilitation policies and measures within the limit of its statutory authority.

Article 19 People’s governments at all levels and their departments concerned shall, under the principle of convenience, efficiency and transparency, simplify service procedures, improve the service efficiency, optimize the government services, and further increase the level of foreign investment services.Relevant competent departments shall prepare and publicize foreign investment guidelines, in a bid to provide foreign investors and foreign-funded enterprises with services and convenience.

Chapter III Investment Protection

Article 20 The State does not expropriate the investment of foreign investors. Under special circumstances, the State may, for the need of the public interest, expropriate or requisition the investment of foreign investors according to law. In case of expropriation or requisition, statutory procedures shall be followed, and fair and reasonable compensation shall be made in a timely manner.

Article 21 Foreign investors may, according to the present Law, freely remit into or out of China, in Renminbi or any other foreign currency, their capital contributions, profits, capital gains, income from asset disposal, intellectual property royalties, lawfully acquired compensation, indemnity or liquidation income and so on within the territory of China.

Article 22 The State protects the intellectual property of foreign investors and foreign-funded enterprises, as well as the legitimate rights and interests of intellectual property obligees and relevant obligees; any infringement upon intellectual property will be investigated for legal liability according to law. The State encourages technical cooperation on the basis of free will and business rules in the process of foreign investment. Technical cooperation conditions shall be determined under the principle of fairness by all investment parties upon equal negotiation, and no administrative organ or any functionary thereof may force the transfer of any technology by administrative means.

Article 23 Administrative organs and their functionaries shall keep confidential the trade secrets of foreign-funded enterprises they have learned about in the course of performing their duties, and shall not divulge or illegally provide such secrets to others.

Article 24 In enacting normative documents concerning foreign investment, the people’s governments at all levels and their departments concerned shall comply with laws and regulations. In the absence of laws or administrative regulations to be served as the basis,they shall not impair foreign-funded enterprises’ legitimate rights and interests or increase their obligations, nor shall they set any market access and exit conditions, or intervene the normal production and operation activities of any foreign-funded enterprise.

Article 25 Local people’s governments at all levels and their departments concerned shall keep policy commitments lawfully made to foreign investors and foreign-funded enterprises and perform all contracts concluded according to the present Law. If any policy commitment or contract needs to be changed for the sake of national interests or public interests, statutory authority and procedures shall be followed, and the foreign investor or foreign-funded enterprise concerned shall be compensated for losses incurred thereby according to the present Law.

Article 26 The State establishes a complaint mechanism for foreign-funded enterprises to timely handle problems encountered by foreign-funded enterprises or their investors, to coordinate and to improve relevant policies and measures. If a foreign-funded enterprise or any of its investors deems that the administrative practice of an administrative organ or functionary thereof infringes upon its legitimate rights and interests, it may apply for coordination and resolution through the complaint mechanism for foreign-funded enterprises.

If a foreign-funded enterprise or its investor deems that the administrative practice of an administrative organ or functionary thereof infringes upon its legitimate rights and interests, apart from applying for coordination and resolution through the complaint mechanism for foreign-funded enterprises as prescribed in the preceding paragraph, it may also apply for administrative reconsideration or institute an administrative lawsuit.

Article 27 A foreign-funded enterprise may legally establish and freely join a chamber of commerce or association and shall conduct relevant activities according to laws, regulations and its articles of association, and maintain the legitimate rights and interests of its members.

Chapter IV Investment Management

Article 28 Foreign investors shall not invest in any field with investment prohibited by the negative list for foreign investment access. Foreign investors shall meet the investment conditions stipulated under the negative list for any field with investment restricted by the negative list for foreign investment access.

For the fields not included in the negative list for foreign investment access, management shall be conducted under the principle of consistency for domestic and foreign investment.

Article 29 The approval and record-filing of foreign investment projects are subject to the relevant provisions of the State.

Article 30 Where foreign investors intend to invest in the industries or fields that are subject to license according to law, relevant licensing formalities shall be completed according to the present Law. Unless otherwise stipulated under laws and administrative regulations, relevant competent departments shall review the licensing applications filed by foreign investors under the conditions and procedures the same as those for domestic investment.

Article 31 The organization form and structure and operating rules of foreign-funded enterprises are subject to the provisions of the Company Law of the People’s Republic of China, the Partnership Enterprise Law of the People’s Republic of China and other applicable laws.

Article 32 Foreign-funded enterprise engaging in production or operation activities shall comply with the provisions on labor protection and social insurance in laws and administrative regulations, handle the tax, accounting, foreign exchange and other matters according to the relevant laws, administrative regulations and relevant provisions of the State, and accept supervision and inspection by relevant competent departments.

Article 33 Where a foreign investor acquires any domestic enterprise in China or participates in the concentration of undertakings by other means, it shall be subject to the review of concentration of undertakings according to the provisions of the Anti-monopoly Law of the People’s Republic of China.

Article 34 The State establishes a foreign investment information report system. Foreign investors or foreign-funded enterprises shall submit investment information to the competent department for commerce concerned through the enterprise registration system and the enterprise credit information publicity system. The contents and scope of foreign investment information report shall be determined under the principle of necessity; it is not allowed to require the submission again of any investment information that can be obtained by interdepartmental information sharing.

Article 35 The State establishes a security review system for foreign investment, under which the security review shall be conducted for foreign investment affecting or likely affecting the state security. A decision on security review made according to the present Law shall be final.

Chapter V Legal Liability

Article 36 Where a foreign investor invests in a field with investment prohibited under the negative list for foreign investment access, the relevant competent department shall order the said investor to cease the investment activity, to dispose of the shares and assets thereof or to take any other necessary measures within a prescribed time limit, and to restore the state before the investment; the illegal gains, if any, shall be confiscated. Where the investment activity of a foreign investor is in breach of any special administrative measure for restrictive access provided for in the negative list for foreign investment access, the relevant competent department shall order the investor to make corrections and take necessary measures to meet the requirements of the aforesaid measure; if the investor fails to do so within the prescribed time limit, the provisions stipulated in the preceding paragraph shall be followed.

If the investment activity of a foreign investor is in breach of the provisions stipulated in the negative list for foreign investment access, apart from being punished according to the provisions of the preceding two paragraphs, the foreign investor shall also assume corresponding legal liability according to law.

Article 37 Where a foreign investor or foreign-funded enterprise, in violation of the provisions of the present Law, fails to report the investment information as required to the foreign investment information report system, the competent department for commerce concerned shall order it to make corrections within a time limit; if it fails to do so within the prescribed time limit, a fine of not less than 100,000 yuan but not more than 500,000 yuan shall be imposed.

Article 38 The relevant department shall lawfully investigate and punish violations of laws and regulations committed by foreign investors and foreign-funded enterprises, and include the violations information into the credit information system under related state provisions.

Article 39 Where a functionary of an administrative organ abuses his/her powers, neglects his/her duties or engages in malpractice for personal gains during the promotion, protection or management of foreign investment, divulges or illegally provides trade secrets he/she has learned about during the course of performance of his/her duties to others, a penalty will be imposed against him/her according to the present Law; if a crime is constituted, the offender will be investigated for criminal liability according to law.

Chapter VI Supplementary Provisions

Article 40 Where a country or region takes any discriminatory prohibitive, restrictive or other similar measure against the People’s Republic of China in terms of investment, the People’s Republic of China may take corresponding measures against the said country or region in light of the actual conditions.

Article 41 Where it is otherwise stipulated by the State on foreign investors’ investment in such financial sectors as banking, securities, insurance, etc. or in securities market, foreign exchange market or any other financial market within the territory of China, such provisions shall prevail.

Article 42 The present Law shall come into force as of January 1, 2020, repealing simultaneously the Law of the People’s Republic of China on Sino-foreign Equity Joint Ventures, the Law of the People’s Republic of China on Wholly Foreign-owned Enterprises and the Law of the People’s Republic of China on Sino-foreign Cooperative Joint Ventures.The foreign-funded enterprises, established in accordance with the Law of the People’s Republic of China on Sino-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 Sino-foreign Cooperative Joint Ventures before the effectiveness of the present Law, may keep their original organizational forms for five years after the effectiveness of the present Law. The specific implementing measures shall be developed by the State Council.