On March 15, 2019, 大红鹰dhy Second Session of 大红鹰dhy Thirteenth National People's Congress of 大红鹰dhy People's Republic of China reviewed and adopted 大红鹰dhy Foreign Investment Law of 大红鹰dhy People's Republic of China (大红鹰dhy “Foreign Investment Law”), which will come into effect on January 1, 2020. From 大红鹰dhy circulation of 大红鹰dhy Foreign Country Investment Law of 大红鹰dhy People's Republic of China (Exposure Draft) by 大红鹰dhy Ministry of Commerce on January 19, 2015 (大红鹰dhy “Foreign Investment Law Draft (2015)”) to 大红鹰dhy promulgation of 大红鹰dhy Foreign Investment Law, 大红鹰dhy legislative process took more than four years, and 大红鹰dhy structure and content of 大红鹰dhy Foreign Investment Law underwent major changes. This article intends to analyze 大红鹰dhy significance of 大红鹰dhy adoption of 大红鹰dhy Foreign Investment Law through 大红鹰dhy presentation of legislative evolution in 大红鹰dhy field of foreign investment, and on that basis, comment on 大红鹰dhy Foreign Investment Law.

1、 大红鹰dhy “Predecessors” of 大红鹰dhy Foreign Investment Law

大红鹰dhy Third Plenary Session of 大红鹰dhy Eleventh Central Committee of 大红鹰dhy Communist Party of China held in December 1978 announced 大红鹰dhy beginning of China's internal economic reform and opening up to 大红鹰dhy outside world. In response to it, 大红鹰dhy Second Session of 大红鹰dhy Fifth National People's Congress of China on July 1, 1979 adopted 大红鹰dhy Law of 大红鹰dhy People's Republic of China on Sino-Foreign Equity Joint Ventures, 大红鹰dhy Fourth Session of 大红鹰dhy Sixth National People's Congress of China on April 12, 1986 adopted 大红鹰dhy Law of 大红鹰dhy People's Republic of China on Wholly Foreign-owned Enterprises and 大红鹰dhy First Session of 大红鹰dhy Seventh National People's Congress of China on April 13, 1988 adopted 大红鹰dhy Law of 大红鹰dhy People's Republic of China on Sino-foreign Co-operative Enterprises (collectively referred to as 大红鹰dhy “Three Laws on 大红鹰dhy Foreign-invested Enterprises”). 大红鹰dhy successive introduction of 大红鹰dhy Three Laws on 大红鹰dhy Foreign-invested Enterprises marked 大红鹰dhy new stage of China's opening up in accordance with law, and established a regulatory system represented by case-by-case approval in 大红鹰dhy field of foreign investment.

Around 2001, in order to promote China's accession to 大红鹰dhy WTO, 大红鹰dhy Three Laws on 大红鹰dhy Foreign-invested Enterprises were amended to meet 大红鹰dhy requirements of 大红鹰dhy WTO rules. Although 大红鹰dhy amendment and 大红鹰dhy subsequent legislation and reform in 大红鹰dhy administrative field did not change 大红鹰dhy regulatory system of 大红鹰dhy case-by-case approval in 大红鹰dhy field of foreign investment, 大红鹰dhy approval system and procedures for foreign investment were gradually standardized, and 大红鹰dhy provisions with a strong flavor of 大红鹰dhy planned economy such as requiring foreign-invested enterprises to make onshore procurement on a priority basis, or to report its operation and construction schemes to 大红鹰dhy competent authorities, etc. were deleted. Such changes met 大红鹰dhy needs of China’s adaption to 大红鹰dhy WTO rules after its accession to 大红鹰dhy WTO, and further accelerated 大红鹰dhy pace of China's opening up.

As 大红鹰dhy reform and opening up is transforming from 大红鹰dhy market-driven mode to 大红鹰dhy innovation-driven mode, 大红鹰dhy above-mentioned regulatory system with 大红鹰dhy feature of emphasizing regulation and neglecting service in 大红鹰dhy field of foreign investment was unable to satisfy 大红鹰dhy booming development of various industries in China and 大红鹰dhy demands of foreign investors for an innovative regulatory system. In January 2015, 大红鹰dhy Ministry of Commerce published 大红鹰dhy Foreign Investment Law Draft (2015) to solicit opinions from 大红鹰dhy public. 大红鹰dhy draft showed 大红鹰dhy framework of a basic law to uniformly and systematically regulate 大红鹰dhy field of foreign investment, and proposed 大红鹰dhy new regulatory system of pre-establishment national treatment and negative list in 大红鹰dhy field of foreign investment, aiming to create a stable, transparent and predictable legal environment for foreign investors to invest in China. However, due to 大红鹰dhy excessively cumbersome provisions thereof and its coverage of many debatable issues such as VIE arrangement and detailed rules of national security review system etc., it sparked fierce discussions in 大红鹰dhy market after 大红鹰dhy announcement but failed to be formally promulgated.

In April 2015, 大红鹰dhy State Council approved 大红鹰dhy establishment of certain free trade zones to explore 大红鹰dhy negative list regulatory system for foreign investment. Since 2016, 大红鹰dhy Three Laws on Foreign-invested Enterprises were further revised. In conjunction with 大红鹰dhy issuance and revision of 大红鹰dhy Provisional Measures on Administration of Filing for Establishment and Change of Foreign Investment Enterprises by 大红鹰dhy Ministry of Commerce, 大红鹰dhy reform of 大红鹰dhy regulatory system for foreign-invested enterprises was implemented, and 大红鹰dhy regulatory system combing 大红鹰dhy general filing and 大红鹰dhy limited approval with respect to foreign investment captured by 大红鹰dhy negative list was established with 大红鹰dhy intention to gradually transfer into 大红鹰dhy new regulatory system of 大红鹰dhy pre-establishment national treatment and negative list in 大红鹰dhy field of foreign investment.

Based on 大红鹰dhy above explorations, on December 26, 2018, 大红鹰dhy National People's Congress of China published 大红鹰dhy Foreign Investment Law (Draft) on its official website (大红鹰dhy “Foreign Investment Law (Draft)”), soliciting opinions from 大红鹰dhy public. Compared with 大红鹰dhy Foreign Investment Law Draft (2015), 大红鹰dhy Foreign Investment Law (Draft) was much shorter in 大红鹰dhy sense that 大红鹰dhy number of provisions was reduced from 170 to 39 and 大红鹰dhy provisions thereof were more of general guiding principles rather than detailed implementing rules.  Controversial issues such as 大红鹰dhy VIE arrangement as well as details of national security review system were deleted from this draft. It clarified 大红鹰dhy regulatory system of pre-establishment national treatment and negative list for foreign investment, and focused on 大红鹰dhy promotion and protection of foreign investment. It also stipulated guiding principles for foreign investment regulatory systems, including 大红鹰dhy investment information report system, 大红鹰dhy review system for concentration of undertakings and 大红鹰dhy national security review system, etc. From December 2018 to mid-March 2019, 大红鹰dhy Foreign Investment Law (Draft) was submitted to 大红鹰dhy Standing Committee of 大红鹰dhy National People's Congress of China and 大红鹰dhy National People's Congress of China for review several times. 大红鹰dhy Foreign Investment Law officially promulgated generally follows 大红鹰dhy framework of Foreign Investment Law (Draft) but is further revised and improved.

2、 Comments on 大红鹰dhy Foreign Investment Law

Based on 大红鹰dhy presentation of legislative evolution in 大红鹰dhy field of foreign investment, we will have a glimpse of 大红鹰dhy present Foreign Investment Law from 大红鹰dhy following three perspectives: 大红鹰dhy implementation of 大红鹰dhy regulatory system of pre-establishment national treatment and negative list for foreign investment, 大红鹰dhy promotion and protection of foreign investment, and 大红鹰dhy connections between 大红鹰dhy Foreign Investment Law and 大红鹰dhy existing laws and systems. 

• 大红鹰dhy Implementation of 大红鹰dhy Regulatory System of Pre-Establishment National Treatment and Negative List for Foreign Investment

Paragraphs 1 and 2 of Article 4 of 大红鹰dhy Foreign Investment Law provide that: “大红鹰dhy State adopts 大红鹰dhy regulatory system of pre-establishment national treatment and negative list for foreign investment. For 大红鹰dhy purpose of 大红鹰dhy preceding paragraph, 大红鹰dhy pre-establishment national treatment refers to granting to foreign investors and their investments, at 大红鹰dhy stage of investment access, 大红鹰dhy treatment no less favorable than that granted to domestic investors and their investments; 大红鹰dhy negative list refers to special administrative measures for access of foreign investment in specific fields as stipulated by 大红鹰dhy State. 大红鹰dhy State shall grant national treatment to foreign investments outside 大红鹰dhy negative list.”

More special implications may be seen if above provisions are reviewed together with 大红鹰dhy “one counter, one form” reform of foreign-invested enterprises’ filing at 大红鹰dhy commerce authorities and registration with market supervision and regulatory authorities. Beginning in June 2018, 大红鹰dhy reform aims to improve 大红鹰dhy information exchange and data sharing between 大红鹰dhy commerce authorities and market supervision and regulatory authorities, optimize 大红鹰dhy application procedures for foreign-invested enterprises, and reduce 大红鹰dhy processing time and costs of enterprises. Under this background, 大红鹰dhy Provisional Measures on Administration of Filing for Establishment and Change of Foreign Investment Enterprises (2018 Amendment), which was issued on June 30, 2018, clarifies that while establishing a new foreign-invested enterprise or converting a domestic enterprise into a foreign-invested enterprise through mergers and acquisitions, 大红鹰dhy relevant entity shall apply for registration with 大红鹰dhy market supervision and regulatory authority and report 大红鹰dhy filing information of 大红鹰dhy establishment of 大红鹰dhy foreign-invested enterprise to 大红鹰dhy commerce authority online. When 大红鹰dhy commerce authority obtains 大红鹰dhy filing information from 大红鹰dhy market supervision and regulatory authority, it should start 大红鹰dhy filing procedures and inform 大红鹰dhy investors at 大红鹰dhy same time. However, 大红鹰dhy above-mentioned foreign-invested enterprise still needs to go through 大红鹰dhy change procedures via 大红鹰dhy comprehensive regulatory system of 大红鹰dhy commerce authorities separately when handling subsequent changes. 大红鹰dhy reason may be that 大红鹰dhy scope of changes stipulated in 大红鹰dhy Provisional Measures on Administration of Filing for Establishment and Change of Foreign Investment Enterprises (2018 Amendment) is broader than 大红鹰dhy scope of changes to be registered with 大红鹰dhy market supervision and regulatory authorities. Under 大红鹰dhy regulatory system of pre-establishment national treatment and negative list as stipulated in 大红鹰dhy Foreign Investment Law, certain matters still remain to be observed, such as whether 大红鹰dhy foreign-invested enterprises outside 大红鹰dhy negative list still need to submit 大红鹰dhy filing information to commerce authorities online or even through a separate channel when they go through establishment registration and change registration at 大红鹰dhy market supervision and regulatory authorities, or whether 大红鹰dhy filing system of commerce authorities may be changed so 大红鹰dhy re-submission of any information that can be obtained by interdepartmental information sharing is no longer required .

Regarding 大红鹰dhy foreign investment fields captured by 大红鹰dhy negative list, 大红鹰dhy implementation measures of 大红鹰dhy special administrative measures for access of foreign investment remain to be observed. For example, for industries with explicit requirements for equity ratio, organizational form or senior management position allocation, it remains to be observed in supporting rules and regulatory practices whether 大红鹰dhy national treatment (i.e. domestic-invested and foreign-invested enterprises are equally treated) can be granted upon 大红鹰dhy fulfillment of 大红鹰dhy above requirements, or 大红鹰dhy case-by-case approval regulatory system continues to apply. 

• Promotion and Protection of Foreign Investment

大红鹰dhy promotion and protection of foreign investment is a major feature of 大红鹰dhy Foreign Investment Law compared to 大红鹰dhy Three Laws on 大红鹰dhy Foreign-invested Enterprises. This section will observe 大红鹰dhy implementation measures of 大红鹰dhy Foreign Investment Law in terms of 大红鹰dhy promotion and protection of foreign investment from four aspects: legislation in 大红鹰dhy field of foreign investment, standard setting and government procurement participation rights; technical cooperation principles; local policies, expropriation, requisition and local governments’ commitments; and complaint mechanism for foreign-invested enterprises in 大红鹰dhy field of foreign investment. 

• Legislation in 大红鹰dhy Field of Foreign Investment, Standard Setting and Government Procurement Participation Rights 

Paragraph 1 of Article 10 of 大红鹰dhy Foreign Investment Law provides that: “opinions and suggestions of foreign-invested enterprises shall be solicited by appropriate means when enacting laws, regulations and rules relating to foreign investment.”

Paragraph 1 of Article 15 provides that: “大红鹰dhy State protects 大红鹰dhy right of foreign-invested enterprises to legally and equally participate in 大红鹰dhy setting of standards, and reinforces 大红鹰dhy information disclosure and social supervision for setting standards.”

Article 16 provides that: “大红鹰dhy State protects foreign-invested enterprises’ participation in government procurement activities through fair competition. Products produced and services provided by foreign-invested enterprises within 大红鹰dhy territory of China shall be equally treated in government procurement according to law.”

In 大红鹰dhy process of legislation participation, standards setting and government procurement, foreign-invested enterprises are generally in a weak position compared with domestic enterprises and private enterprises are generally in a weak position compared with state-owned enterprises. It is explicitly written in 大红鹰dhy Foreign Investment Law that opinions of foreign-invested enterprises shall be solicited in 大红鹰dhy legislation process relating to foreign investment, that foreign-invested enterprises may equally participate in standards setting in accordance with laws, that 大红鹰dhy products produced and services provided by foreign-invested enterprises in China shall be treated equally, and that foreign-invested enterprises may participate in 大红鹰dhy government procurement activities through fair competition and in accordance with 大红鹰dhy law. 大红鹰dhy above indicate 大红鹰dhy confidence and determination of 大红鹰dhy Chinese government to improve 大红鹰dhy transparency of legislation in 大红鹰dhy field of foreign investment, to advance 大红鹰dhy promotion and protection of foreign investment, and to grant national treatment to foreign-invested enterprises.

• Technical Cooperation Principle

Article 22 of 大红鹰dhy Foreign Investment Law provides that: “大红鹰dhy State protects 大红鹰dhy intellectual property of foreign investors and foreign-invested enterprises, as well as 大红鹰dhy legitimate rights and interests of intellectual property owners and relevant parties; any infringement upon intellectual property will be held liable according to law. 大红鹰dhy State encourages technical cooperation on 大红鹰dhy basis of free will and business rules in 大红鹰dhy process of foreign investment. Technical cooperation conditions may be determined under 大红鹰dhy principle of fairness by all investment parties upon equal negotiation and no administrative authority or officials thereof may force 大红鹰dhy transfer of any technology by administrative means.”

One of 大红鹰dhy highlights of 大红鹰dhy Foreign Investment Law is 大红鹰dhy explicit inclusion of “no administrative authority or officials thereof may force 大红鹰dhy transfer of any technology by administrative means.” One of 大红鹰dhy goals of China's opening up is to introduce advanced foreign technology while one of 大红鹰dhy leverages of foreign investors is their advanced technology. Arrangements with respect to technology transfer, license and restrictions thereof are usually heavily negotiated in 大红鹰dhy process of foreign investment. “No administrative authority or officials thereof may force 大红鹰dhy transfer of any technology by administrative means” is 大红鹰dhy formal commitment made by China to address 大红鹰dhy concerns of foreign investors, as well as a strong response to 大红鹰dhy accusation of compulsory technology transfer made by some foreign countries.

• Local Policies, Expropriation, Requisition and Local Governments’ Commitments

Article 18 of 大红鹰dhy Foreign Investment Law provides that: “a local people's government at or above 大红鹰dhy county level may, according to laws, administrative regulations and local rules, adopt foreign investment promotion and facilitation policies and measures within its statutory authorization.”

Article 20 provides that: “大红鹰dhy State shall not expropriate 大红鹰dhy investment of foreign investors. Under special circumstances, 大红鹰dhy State may, for 大红鹰dhy need of 大红鹰dhy public interest, expropriate or requisite 大红鹰dhy investment of foreign investors according to law. In such case, statutory procedures shall be followed, and fair and reasonable compensation shall be made in a timely manner.”

Article 25 provides that: “local people's governments at all levels and relevant departments thereof shall honor policy commitments lawfully made to foreign investors and foreign-invested enterprises and perform all contracts entered into according to law.  If any policy commitment or contract needs to be changed for 大红鹰dhy sake of national interests or public interests, 大红鹰dhy statutory authorization and procedures shall be followed, and 大红鹰dhy foreign investor or foreign-invested enterprise concerned shall be compensated for losses incurred thereby according to law.”

大红鹰dhy level of economic development varies across China, and 大红鹰dhy demand for foreign investment and service capabilities thereto are also different. 大红鹰dhy explicit inclusion of “adopt foreign investment promotion and facilitation policies and measures within its statutory authorization” not only gives local governments 大红鹰dhy policy flexibility in attracting foreign investment, but also restricts 大红鹰dhy local governments’ unauthorized behavior to attract investment.” In 大红鹰dhy future, local governments should change 大红鹰dhy ways to attract foreign investment from relying on land, tax incentives, and local subsidies to focusing on providing local policies tailored to local conditions and improving their service quality.

Willingly or unwillingly trading or cooperation with governments at all levels and relevant departments is a common situation encountered in 大红鹰dhy process of foreign investment. Compared to 大红鹰dhy Three Laws on Foreign-invested Enterprises, 大红鹰dhy Foreign Investment Law emphasizes that “fair and reasonable” compensation should be given for expropriation and requisition, and that any change of policy commitment or contract needed for 大红鹰dhy sake of “national interests or public interests” should be carried out according to law and any loss caused thereof should be compensated. Such provisions limit 大红鹰dhy causes for governments at all levels and relevant departments to change their policy commitments and contracts, and expressly provide 大红鹰dhy protection to 大红鹰dhy rights of foreign investors to obtain compensation under 大红鹰dhy aforementioned circumstances. It should be noted that 大红鹰dhy Foreign Investment Law emphasizes that 大红鹰dhy policy commitments and contracts that governments at all levels and relevant departments should honor have to be made according to law. In 大红鹰dhy future, when trading or cooperating with governments and relevant departments, foreign investors and foreign-invested enterprises should make judgments on 大红鹰dhy scope of statutory authorization of governments and relevant departments, so as to avoid 大红鹰dhy situations where 大红鹰dhy commitments given by or contracts entered into with governments or relevant departments cannot be implemented or enforced because their acts are ultra vires.

• 大红鹰dhy Complaint Mechanism for Foreign-Invested Enterprises

Article 26 of 大红鹰dhy Foreign Investment Law provides that: “大红鹰dhy State shall establish a complaint mechanism for foreign-invested enterprises to timely resolve problems encountered by foreign-invested enterprises or their investors, to coordinate and to promote 大红鹰dhy implementation of relevant policies and measures. If a foreign-invested enterprise or any of its investors claims that 大红鹰dhy administrative action of an administrative authority or officials thereof infringes its legitimate rights and interests, it may apply for mediation and resolution through 大红鹰dhy complaint mechanism for foreign-invested enterprises. If a foreign-invested enterprise or any of its investors claims that 大红鹰dhy administrative action of an administrative authority or any official thereof infringes its legal rights and interests, besides applying for mediation and resolution through 大红鹰dhy complaint mechanism for foreign-invested enterprises as prescribed in 大红鹰dhy preceding paragraph, it may also apply for an administrative reconsideration or file an administrative lawsuit.”

This mechanism is an assurance of promotion and protection of foreign investments. Although foreign investors and foreign-invested enterprises are not excluded from 大红鹰dhy current framework of administrative and judicial procedures, an independent complaint mechanism specifically serving foreign-invested enterprises will contribute to 大红鹰dhy implementation of 大红鹰dhy promotion and protection of foreign investments, given 大红鹰dhy overloaded capacity of 大红鹰dhy current framework of administrative and judicial procedures. Different from 大红鹰dhy Foreign Investment Law Draft, 大红鹰dhy officially promulgated Foreign Investment Law defines 大红鹰dhy “complaint mechanism for foreign-invested enterprises” as a mediation and resolution mechanism, and connects it to 大红鹰dhy administrative reconsideration and administrative lawsuit, making clear that 大红鹰dhy complaint mechanism for foreign-invested enterprises is not a preparatory procedure of administrative reconsideration or administrative lawsuit in 大红鹰dhy field of foreign investment.

• Connections between 大红鹰dhy Foreign Investment Law and Current Laws and Legal Systems

• Connection with International Treaties and Agreements

Paragraph 4 of Article 4 of 大红鹰dhy Foreign Investment Law provides that: “if any of 大红鹰dhy international treaties or agreements to which 大红鹰dhy People's Republic of China is a contracting party provides treatments more favorable (than in this Law) with respect to 大红鹰dhy access of foreign investors, such treatments may apply.”

This provision harmonizes 大红鹰dhy national treatment granted to foreign investors under 大红鹰dhy Foreign Investment Law with 大红鹰dhy possible “super-national” treatment that may be granted to foreign investors from certain nations or regions under international treaties or agreements, resolves 大红鹰dhy potential conflicts between domestic legislation and international treaties and agreements, and reserves flexibilities for 大红鹰dhy opening up and diplomatic policies of China as well.

• Connection with Laws including 大红鹰dhy Company Law and 大红鹰dhy Partnership Enterprise Law

Article 31 of 大红鹰dhy Foreign Investment Law provides that: “大红鹰dhy provisions of 大红鹰dhy Company Law of 大红鹰dhy People's Republic of China, 大红鹰dhy Partnership Enterprise Law of 大红鹰dhy People's Republic of China and other applicable laws shall apply to 大红鹰dhy organizational form and structure and operating rules of foreign-invested enterprises.”

Paragraph 2 of Article 42 provides that: “foreign-invested enterprises, established in accordance with 大红鹰dhy Law of 大红鹰dhy People's Republic of China on Sino-foreign Equity Joint Ventures, 大红鹰dhy Law of 大红鹰dhy People's Republic of China on Wholly Foreign-owned Enterprises or 大红鹰dhy Law of 大红鹰dhy People's Republic of China on Sino-foreign Co-operative Enterprises before 大红鹰dhy effectiveness of this Law, may retain 大红鹰dhy original organizational forms for five years after 大红鹰dhy effectiveness of this Law. 大红鹰dhy specific implementing measures shall be issued by 大红鹰dhy State Council.”

Instead of differentiating regulation according to 大红鹰dhy organizational forms of enterprises established under 大红鹰dhy Three Laws on 大红鹰dhy Foreign-invested Enterprises, 大红鹰dhy Foreign Investment Law directs issues of “organizational form and structure” to 大红鹰dhy Company Law of 大红鹰dhy People's Republic of China (大红鹰dhy “Company Law”), 大红鹰dhy Partnership Enterprise Law of 大红鹰dhy People's Republic of China (大红鹰dhy “Partnership Enterprise Law”) and other applicable laws, and thus on one hand, effects 大红鹰dhy national treatment to foreign investors, while on 大红鹰dhy other hand, avoids conflicts with laws such as 大红鹰dhy Company Law and 大红鹰dhy Partnership Enterprise Law as well as their further amendments.

大红鹰dhy Foreign Investment Law provides a five-year grace period for foreign-invested enterprises established under 大红鹰dhy Three Laws on 大红鹰dhy Foreign-invested Enterprises to adjust 大红鹰dhy organizational forms, etc. 大红鹰dhy earlier established foreign-invested enterprise should be reminded to adjust its organizational form per its specific situation in accordance to 大红鹰dhy Company Law or 大红鹰dhy Partnership Enterprise Law. For example, a Sino-foreign equity joint venture with 大红鹰dhy board of directors as its supreme governing body should establish 大红鹰dhy shareholders’ meeting, 大红鹰dhy board of directors and 大红鹰dhy board of supervisors according to 大红鹰dhy Company Law. We notice that compared to 大红鹰dhy Foreign Investment Law Draft, 大红鹰dhy expression that “大红鹰dhy specific implementing measures shall be issued by 大红鹰dhy State Council” with respect to 大红鹰dhy adjustments in 大红鹰dhy five-year grace period is added to 大红鹰dhy officially promulgated Foreign Investment Law. We look forward to 大红鹰dhy following being further elaborated in 大红鹰dhy implementing measures to be issued by 大红鹰dhy State Council: (i) 大红鹰dhy specific approaches to adjust organizational form and structure and operating rules for 大红鹰dhy foreign-invested enterprises established under 大红鹰dhy Three Laws on 大红鹰dhy Foreign-invested Enterprises to be in conformity to 大红鹰dhy Company Law, 大红鹰dhy Partnership Enterprise Law and other applicable laws, such as, how to deal with those foreign-invested enterprises established under 大红鹰dhy Three Laws on 大红鹰dhy Foreign-invested Enterprises that have special rules regarding its internal corporate governance, equity transfer, profit distribution and withholding of relevant reserves, etc., and (ii) 大红鹰dhy measures applicable to foreign-invested enterprises that fail to complete 大红鹰dhy adjustment after 大红鹰dhy expiration of 大红鹰dhy five-year grace period.

• Connection with 大红鹰dhy Anti-monopoly Law

Article 33 of 大红鹰dhy Foreign Investment Law provides that: “where a foreign investor acquires a domestic enterprise in China or participates in 大红鹰dhy concentration of undertakings by other means, it shall be subject to 大红鹰dhy review of concentration of undertakings according to 大红鹰dhy provisions of 大红鹰dhy Anti-monopoly Law of 大红鹰dhy People's Republic of China.”

大红鹰dhy above provision makes clear that 大红鹰dhy review of concentration of undertakings also applies to 大红鹰dhy field of foreign investments, while 大红鹰dhy scope or procedures of such review shall be subject to 大红鹰dhy more specialized Anti-monopoly Law of 大红鹰dhy People's Republic of China.

• Connection with 大红鹰dhy Current Information Report System

Article 34 of 大红鹰dhy Foreign Investment Law provides that: “大红鹰dhy State shall establish a foreign investment information report system. Foreign investors or foreign-invested enterprises shall submit investment information to 大红鹰dhy commerce authority through 大红鹰dhy enterprise registration system and 大红鹰dhy enterprise credit information publicity system. 大红鹰dhy content and scope of foreign investment information report shall be determined based on 大红鹰dhy principle of necessity; no separate submission shall be required with respect to any investment information that can be obtained by interdepartmental information sharing.”

大红鹰dhy above provision makes clear 大红鹰dhy channel and scope of 大红鹰dhy information report. 大红鹰dhy channel of “大红鹰dhy enterprise registration system and 大红鹰dhy enterprise credit information publicity system” seems to be 大红鹰dhy extension of 大红鹰dhy “one counter, one form” for 大红鹰dhy foreign-invested enterprise’ commerce filing and market supervision and regulatory registration. 大红鹰dhy principles of “necessity” and “exclusion of shared information” may effectively lighten 大红鹰dhy burden of foreign investors and foreign-invested enterprises regarding such reporting obligation.

• Connection with 大红鹰dhy Review of National Security

Article 35 of 大红鹰dhy Foreign Investment Law provides that: “大红鹰dhy State shall establish a security review system for foreign investment, under which 大红鹰dhy security review shall be conducted with respect to foreign investments that affect or may affect national security. 大红鹰dhy decision on security review legally rendered shall be 大红鹰dhy final decision.”

Instead of attempting to establish a detailed national security review system for foreign investment with a chapter of 27 provisions in 大红鹰dhy Foreign Investment Law Draft (2015), 大红鹰dhy officially promulgated Foreign Investment Law only includes a general rule with respect to 大红鹰dhy “security review system for foreign investment.” Before 大红鹰dhy implementing measures regarding 大红鹰dhy specific scope and procedures of 大红鹰dhy review are enacted, 大红鹰dhy current security review system for foreign investment, established by 大红鹰dhy Notice of 大红鹰dhy General Office of State Council on Establishment of Security Review System Pertaining to Mergers and Acquisitions of Domestic Enterprises by Foreign Investors and 大红鹰dhy Trial Measures on National Security Review for Foreign Investments in Pilot Free Trade Zones, shall remain to apply in this field. Considering 大红鹰dhy types of foreign investments provided in Article 2 of 大红鹰dhy Foreign Investment Law and 大红鹰dhy structure of 大红鹰dhy aforementioned provision, it can be reasonably inferred that 大红鹰dhy national security review system for foreign investment in 大红鹰dhy future may be similar to 大红鹰dhy mode in 大红鹰dhy pilot free trade zones and cover all types of foreign investment, rather than be limited to mergers and acquisitions of domestic enterprises by foreign investors. Such mode of review may better meet 大红鹰dhy needs for 大红鹰dhy protection of national security in complicated circumstances that may change from time to time as well.

It is worth noting whether “大红鹰dhy decision on security review legally rendered shall be 大红鹰dhy final decision” has 大红鹰dhy same effect as “no administrative reconsideration and administrative litigation may be filed against any decision on 大红鹰dhy national security review rendered in accordance with 大红鹰dhy present Chapter” under 大红鹰dhy Foreign Investment Law Draft (2015). Despite 大红鹰dhy fact that 大红鹰dhy national security review is a relatively special administrative function of 大红鹰dhy government and may involve large amount of confidential information concerning national strategy, 大红鹰dhy exemption of such decision from administrative reconsideration and administrative litigation entirely may result in 大红鹰dhy national security review being a “black hole” in 大红鹰dhy field of foreign investment if 大红鹰dhy approach of 大红鹰dhy Foreign Investment Law Draft (2015) is to be followed. It will be an important issue in 大红鹰dhy future establishment of national security review system for foreign investment as to how to connect 大红鹰dhy national security review decision with administrative reconsideration and administrative litigation under certain conditions.

3、 Conclusion 

Compared to 大红鹰dhy drafts in 大红鹰dhy process of legislation, 大红鹰dhy officially promulgated Foreign Investment Law is more comprehensive and general. It explicitly specifies 大红鹰dhy regulatory system of pre-establishment national treatment and negative list in 大红鹰dhy field of foreign investment, clarifies 大红鹰dhy principles and rules of promotion and protection of foreign investments, and connects with 大红鹰dhy current laws and legal systems successfully. However, 大红鹰dhy generality of 大红鹰dhy provisions of Foreign Investment Law also makes its implementing effect remain to be observed in 大红鹰dhy following implementing measures and subsequent regulatory practice.