China Unveils Draft New Foreign Investment Law

As part of the Chinese government’s ongoing drive to improve the foreign investment climate, the Ministry of Commerce published the draft Foreign Investment Law (the “Draft New Law”) on 19 Jan 2015, seeking public comments on this important piece of legislation. The consultation period will end on 17 Feb 2015. Although there is no detail on when the draft law will become effective and to what extent the proposed changes will be adopted, many of the changes proposed in the draft law are substantial in nature and if given effect, will bring sweeping change to the existing foreign investment regime.

In this alert, we summarise the changes proposed in the draft and analyse how this impacts foreign investment regulation in China. Highlights include:

  • Corporate governance reform
  • Scope of foreign investment review 
  • National treatment and negative list
  • Reporting based supervision
  • National security review
  • VIE structures under the Draft New Law

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