On 13 August 2023, the State Council of the People’s Republic of China (“State Council”) released a circular entitled Opinions on Further Improving the Foreign Investment Environment and Enhancing Attraction of Foreign Investment (“Opinions”) following the policy of attracting foreign investment emphasized at the politburo meeting of the CPC Central Committee held in April this year. The Opinions propose 24 articles in six aspects: better use of foreign investment, national treatment for foreign-invested enterprises, foreign investment protection, investment and operation facilitation, fiscal and tax support and promotion methods of foreign investment.
The first 12 provisions of the Opinions specify measures on how to expand the breadth and depth of foreign investment by making better use of foreign investment, ensuring national treatment for foreign-invested enterprises and strengthening the protection of foreign investment. The specific measures include attracting more foreign investment in key areas like biomedicine, advanced manufacturing, modern services, digital economy and green economy; expanding the comprehensive pilot program of the service industry that is open to foreign investment; broaden the channels for attracting foreign investments; guarantee foreign-invested enterprises to participate in government procurement activities; supporting foreign-invested enterprises to participate in the formulation of standards; improving the protection of intellectual property rights for foreign investment; and standardizing the formulation of foreign-related economic and trade regulations.
Articles 2, 10 and 11 of the Opinions deal with guidance on better use and protection of foreign investment in terms of intellectual property rights. Firstly, it encourages combined pledge financing of intellectual property rights, equity and related entity assets, and supports standardized exploration of intellectual property securitization. Secondly, it put forward four specific measures such as improving the administrative adjudication system for patent infringement disputes, setting up an exhibition intellectual property workstation to accept intellectual property applications for exhibitors, self-promise that there is no patent infringement in the procurement of drugs or medical consumables and prohibition of procurement of the patent products to strengthen the administrative protection of intellectual property rights. Thirdly, it requires strengthening the administrative enforcement of intellectual property rights through the methods of carrying out special administrative enforcement actions against cross-regional and chained intellectual property infringements and establishing an integrated administrative enforcement mechanism with appropriately simplifies procedures.
Articles 13 to 16 of the Opinions are provisions on how to improve the facilitation of foreign investment operations. According to the provisions, China will provide foreign executives, technicians and their family members of foreign-invested enterprises with convenience for entry, exit, stay and residence; provide efficient security assessments of the export of important data and personal information for qualified foreign-invested enterprises; and improve the service for foreign-invested enterprises by establishing round-table conference system, providing convenience to enjoy tariff reduction and exemption policies and so on.
With the promulgation of the Cybersecurity Law, the Data Security Law and the Personal Information Protection Law, cross-border data flow is one of the big concern of foreign-invested enterprises. According to Article 13 of the Measures for the Standard Contract for the Outbound Transfer of Personal Information issued by Cyberspace Administration of China (“CAC”) under the Personal Information Protection Law, the deadline for rectification of illegal cross-border data flow is 30 November 2023. Article 14 of the Opinions proposes two ways to eliminate their worries. One is to establish a green channel to efficiently carry out security assessments for the export of important data and personal information for qualified foreign-invested enterprises. The other is to pilot and explore the formation of a white list for free-flowing general data and the establishment of a platform providing compliance services for cross-border data flows in Beijing, Tianjin, Shanghai or Guangdong-Hong Kong-Macao Greater Bay Area. According to an article published in the Australian Financial Review on 17 August 2023, officials from the Officers from the CAC met with executives from dozens of foreign-invested enterprises, including Walmart and PayPal. They discussed how to use the two ways, green channel and white list, to ensure that the cross-border data flow of foreign-invested enterprises complies with the Measures before the end of November. The CAC officers acknowledge challenges in getting sensitive information out of China.
Article 16 of the Opinions specifically points out the need to establish a round-table conference system for foreign-invested enterprises to improve communication and build mutual trust. In the regular policy briefing, MOFCOM also stated that it will provide better services for the coordination of foreign trade and foreign investment, and make good use of the round-table conference system for foreign-invested enterprises to actively collect the appeals of foreign-invested enterprises and promote solutions.
In terms of increasing fiscal and taxation support, Articles 17 to 20 of the Opinions require relevant government departments and local governments to formulate relevant policies or take effective actions in promoting the protection of foreign investment, encouraging foreign-invested enterprises to reinvest in China, implementing relevant preferential tax policies and supporting foreign-invested enterprises to invest in the encouraged industries. In addition, in terms of ways to promote foreign investment, Articles 21 to 24 of the Opinions mention several methods including carrying out a series of activities with the theme of “the Year of Investment in China”, and supporting the normalization of overseas investment promotion in various regions.
Before the Opinions were issued, the relevant departments had listened to the suggestions of foreign-invested enterprises and related commercial organizations. On 21 July 2023, MOFCOM held a special policy interpretation roundtable meeting to interpret several hot issues including cross-border data flow and export control with the American Chamber of Commerce, the European Union Chamber of Commerce (“European Chamber”), the Japanese Chamber of Commerce, the Korean Chamber of Commerce and more than 30 companies in China, and exchanged opinions with them. As a result, the Opinions are generally welcomed although there are doubts about the efficiency and depth of the implementation of the Opinions.
One day after the release of the Opinions, the European Chamber published a statement to confirm the importance of the Opinions on optimizing the foreign investment environment and attracting more foreign investment. The statement mentioned in particular that the provisions such as the requirement for clarifying the specific criteria for the identification of “produced in China” in Article 6 and the pilot proposals to facilitate the free flow of data in Article 14 can improve business confidence of foreign-invested enterprises. In addition, it raised its additional concerns about tax incentives under Article 19.
On 14 August 2023, the State Council held a regular policy briefing, in which relevant persons on behalf of the Ministry of Commerce (“MOFCOM”), the Ministry of Industry and Information Technology (“MIIT”), the Ministry of Finance (“MOF”), and the State Administration for Market Regulation (“SAMR”) introduced their corresponding follow-up plans in response to the relevant provisions of the Opinions as follows: 1. MOFCOM will work with relevant departments to promote the rational reduction of the negative list for foreign investment access, continue to expand foreign investment market access; expand channels for collecting questions and listening to opinions, and respond to and resolve relevant business concerns promptly; continue to hold the activities of “the Year of Investment in China”; fully mobilize the forces of embassies and consulates abroad, domestic and foreign business associations, etc., and make good use of various economic and trade exhibitions, free trade pilot zones and other platforms to provide support for attracting investment from all over the world; and introduce a batch of high-quality foreign investment. 2. The MITT will strengthen policy guidance, deepen regional cooperation, build docking platforms, strengthen international cooperation, and guide all eastern, central and western regions to realize sound development based on their industrial foundation and unique local advantages. 3. The MOF will introduce relevant policies and measures as soon as possible to further clarify the specific standards for the term “production in China”; research and innovate cooperative procurement methods to support foreign-invested enterprises to innovate and develop world-leading products in China; actively promote the revision of the Government Procurement Law, and the coordination and unification of the Government Procurement Law and the Bidding Law; and correct and investigate illegal acts of differential treatment for foreign-invested enterprises. 4. The National Standardization Management Committee has issued guidance on strengthening the work of the National Professional Standardization Technical Committee. The SAMR encourages foreign-invested enterprises and foreign experts to participate in the formulation of standards. At present, 62% of professional standardization technical committees have foreign-invested enterprise members.
In conclusion, the content of the Opinions reflects that China intends to relieve the concerns of foreign-invested enterprises in all aspects. It not only involves macro terms such as strengthening the protection of their intellectual property rights and granting national treatment to them but also involves some specific micro terms, including optimizing their entry and exit policies and improving their convenience of Internet payment. However, the Opinions are instructive and lack operability in implementation. It depends on the subsequent implementation of it by relevant departments and local governments to achieve the purpose of improving China’s business environment and attracting more foreign investment.