Beijing to Implement New Foreign Investment Policy
Published 14 June 2024
Xia Yu
To implement China’s Foreign Investment Law and its Implementing Regulation implemented in 2020, 11 provinces in China have promulgated local policy measures on foreign investment in the first half of 2024. On 31 May 2024, the Regulation on Foreign Investment for Beijing (“Regulation”) was adopted by the Standing Committee of Beijing Municipal People’s Congress. Based on a survey of representative foreign-invested enterprises in Beijing, the Regulation responded to issues that foreign-invested enterprises are more concerned about, including cross-border data flow, intellectual property protection, policy formulation, government compliance with contracts and commitments, and government-enterprise communication mechanisms.
In response to the issue of cross-border data transfer that foreign-invested entities are generally concerned about, the Regulation proposes two solutions of a general data list and an important data list applied for China (Beijing) Free Trade Pilot Zone (“Beijing FTPZ”). Beijing FTPZ, approved by China’s State Council in September 2020, has an implementation area of 119.68 square kilometers, covering three areas of scientific and technological innovation, international business services, and high-end industries. The general data list refers to promoting the safe and orderly cross-border flow of data such as R&D, production, and sales of foreign-invested enterprises by the law; and facilitating qualified foreign-invested enterprises to carry out security assessments of important data and personal information going abroad. According to the Regulation, an important data list will be formulated for Beijing FTPZ. Then, data processors in Beijing FTPZ can be exempted from declaring security assessments for data export, signing standard contracts for personal information export, and passing personal information protection certification if they provide data outside the important data list to foreign countries.
The Regulation strengthens intellectual property protection for foreign investment. It stipulates that Beijing will improve its rapidly coordinated protection mechanism for intellectual property rights and the diversified dispute resolution mechanism to equally protect the intellectual property rights of foreign investment. Beijing courts at all levels shall accept, review, and make rulings on applications for property preservation, evidence preservation, and behavior preservation in foreign investment intellectual property cases within the statutory period. For intentional infringement of intellectual property rights, punitive damages shall be applied following the law if the circumstances are serious.
In terms of policy formulation, the Regulation adopts experimental policies and measures, which may break through existing legal provisions, for foreign investment. It clearly states that the experimental policies and measures for expanding the opening of foreign investment will be first applied in Beijing FTPZ and the National Comprehensive Demonstration Zone for Expanding the Opening-up of Services which main tasks include promoting the deepening of reform and expansion of opening up in key areas of the service industry, exploring rules and regulations for emerging industries, and optimizing trade and investment system arrangements. The solution mentioned above for the list of important data in Beijing FTPZ may break through the limitations of China’s existing data security regulations. Secondly, the Regulation clearly states that preferential measures will be formulated for foreign investment, such as fee reductions, land use quota guarantees, talent introduction guarantees, public service provision, and investment promotion incentives. In addition to encouraging foreign investment in the national catalog of industries encouraged by foreign investment, strategic emerging industries, advanced manufacturing, and modern service industries that Beijing focuses on developing, the Regulation encourages foreign investors to participate in promoting green and low-carbon development and to carry out technical cooperation with the universities and scientific research institutions in Beijing. Thirdly, the Regulation repeatedly reiterates equality. For example, foreign investment will be equally subject to various national and municipal policies that support enterprise development; foreign-invested enterprises can participate in standard formulation and revision work on the same terms as domestic enterprises and enjoy subsidy funds; and when formulating policies and measures closely related to production and operation activities, a fair competition review will be conducted, and discriminatory policies and measures will not be formulated or implemented.
The Regulation reaffirms the government’s determination to abide by agreements and commitments. According to the Regulation, Beijing will establish and improve its record and punishment system for dishonest government affairs, requiring the governments at all levels to fulfill their policy commitments made to foreign investment and various contracts concluded under the law. If the policy commitments or contractual agreements are changed due to the needs of the national or public interests, the losses suffered shall be compensated.
To respond to the demands of foreign-invested enterprises promptly, the Regulation stipulates that Beijing will establish a multi-level and multi-form government-enterprise communication mechanism. According to the Regulation, the governments will hold forums and policy consultation meetings regularly to listen to the opinions of foreign-invested enterprises, chambers of commerce, and associations, while foreign-invested enterprises can also reflect relevant demands, opinions, and suggestions through channels such as the service hotline of 12345 and the appeal collection system for foreign-invested enterprises. In addition, the Regulation requires that inspections of foreign-invested enterprises should implement the publicity system of the implementation of the law to avoid repeated inspections. For foreign-invested enterprises with low credit risks, the proportion and frequency of spot checks should be reduced to ensure that domestic and foreign-invested enterprises are equally subject to administrative penalty standards. Furthermore, the Regulation stipulates that when formulating local laws, regulations, and normative documents related to foreign investment, the opinions and suggestions of foreign-invested enterprises and relevant chambers of commerce and associations should be heard. The normative documents related to foreign investment should be published on time, and those that have not been published shall not be used as the basis for administrative management.
In addition, the Regulation proposes improved policy measures in the areas of skilled talent introduction, free inflow and outflow of foreign exchange, and government procurement. In conclusion, the Regulation attempts to make breakthroughs in the three goals of equality, openness, and advancement. Equality means gradually reducing the differential treatment between domestic and foreign-funded enterprises; openness means expanding the investment scope of foreign capital as much as possible; and advancement means exploring the formulation of rules in emerging fields.
In response to the issue of cross-border data transfer that foreign-invested entities are generally concerned about, the Regulation proposes two solutions of a general data list and an important data list applied for China (Beijing) Free Trade Pilot Zone (“Beijing FTPZ”). Beijing FTPZ, approved by China’s State Council in September 2020, has an implementation area of 119.68 square kilometers, covering three areas of scientific and technological innovation, international business services, and high-end industries. The general data list refers to promoting the safe and orderly cross-border flow of data such as R&D, production, and sales of foreign-invested enterprises by the law; and facilitating qualified foreign-invested enterprises to carry out security assessments of important data and personal information going abroad. According to the Regulation, an important data list will be formulated for Beijing FTPZ. Then, data processors in Beijing FTPZ can be exempted from declaring security assessments for data export, signing standard contracts for personal information export, and passing personal information protection certification if they provide data outside the important data list to foreign countries.
The Regulation strengthens intellectual property protection for foreign investment. It stipulates that Beijing will improve its rapidly coordinated protection mechanism for intellectual property rights and the diversified dispute resolution mechanism to equally protect the intellectual property rights of foreign investment. Beijing courts at all levels shall accept, review, and make rulings on applications for property preservation, evidence preservation, and behavior preservation in foreign investment intellectual property cases within the statutory period. For intentional infringement of intellectual property rights, punitive damages shall be applied following the law if the circumstances are serious.
In terms of policy formulation, the Regulation adopts experimental policies and measures, which may break through existing legal provisions, for foreign investment. It clearly states that the experimental policies and measures for expanding the opening of foreign investment will be first applied in Beijing FTPZ and the National Comprehensive Demonstration Zone for Expanding the Opening-up of Services which main tasks include promoting the deepening of reform and expansion of opening up in key areas of the service industry, exploring rules and regulations for emerging industries, and optimizing trade and investment system arrangements. The solution mentioned above for the list of important data in Beijing FTPZ may break through the limitations of China’s existing data security regulations. Secondly, the Regulation clearly states that preferential measures will be formulated for foreign investment, such as fee reductions, land use quota guarantees, talent introduction guarantees, public service provision, and investment promotion incentives. In addition to encouraging foreign investment in the national catalog of industries encouraged by foreign investment, strategic emerging industries, advanced manufacturing, and modern service industries that Beijing focuses on developing, the Regulation encourages foreign investors to participate in promoting green and low-carbon development and to carry out technical cooperation with the universities and scientific research institutions in Beijing. Thirdly, the Regulation repeatedly reiterates equality. For example, foreign investment will be equally subject to various national and municipal policies that support enterprise development; foreign-invested enterprises can participate in standard formulation and revision work on the same terms as domestic enterprises and enjoy subsidy funds; and when formulating policies and measures closely related to production and operation activities, a fair competition review will be conducted, and discriminatory policies and measures will not be formulated or implemented.
The Regulation reaffirms the government’s determination to abide by agreements and commitments. According to the Regulation, Beijing will establish and improve its record and punishment system for dishonest government affairs, requiring the governments at all levels to fulfill their policy commitments made to foreign investment and various contracts concluded under the law. If the policy commitments or contractual agreements are changed due to the needs of the national or public interests, the losses suffered shall be compensated.
To respond to the demands of foreign-invested enterprises promptly, the Regulation stipulates that Beijing will establish a multi-level and multi-form government-enterprise communication mechanism. According to the Regulation, the governments will hold forums and policy consultation meetings regularly to listen to the opinions of foreign-invested enterprises, chambers of commerce, and associations, while foreign-invested enterprises can also reflect relevant demands, opinions, and suggestions through channels such as the service hotline of 12345 and the appeal collection system for foreign-invested enterprises. In addition, the Regulation requires that inspections of foreign-invested enterprises should implement the publicity system of the implementation of the law to avoid repeated inspections. For foreign-invested enterprises with low credit risks, the proportion and frequency of spot checks should be reduced to ensure that domestic and foreign-invested enterprises are equally subject to administrative penalty standards. Furthermore, the Regulation stipulates that when formulating local laws, regulations, and normative documents related to foreign investment, the opinions and suggestions of foreign-invested enterprises and relevant chambers of commerce and associations should be heard. The normative documents related to foreign investment should be published on time, and those that have not been published shall not be used as the basis for administrative management.
In addition, the Regulation proposes improved policy measures in the areas of skilled talent introduction, free inflow and outflow of foreign exchange, and government procurement. In conclusion, the Regulation attempts to make breakthroughs in the three goals of equality, openness, and advancement. Equality means gradually reducing the differential treatment between domestic and foreign-funded enterprises; openness means expanding the investment scope of foreign capital as much as possible; and advancement means exploring the formulation of rules in emerging fields.