Foreign businesses fret as China fast-tracks investment law

BEIJING (AFP) – China is fast-tracking a foreign investment law at an unprecedented pace to meet Washington’s demands on trade, but businesses fear that time to review and raise objections on a crucial piece of legislation has been cut short.

The law will eliminate the requirement for foreign enterprises to transfer proprietary technology to Chinese joint-venture partners.

It also includes other steps to level the business playing field that Western trading partners have long demanded.

China’s Parliament is expected to vote on the legislation in March – barely two months after debating a first draft.

“It is indeed unprecedented that the bill is being moved by the NPC (National People’s Congress) at such a fast pace,” Expert on Chinese law at the National University of Singapore Wang Jiangyu told AFP.

“Normally it would take one to three years for a bill to be passed and signed into law.”

Foreign businesses worry the draft glosses over details and that vague language leaves room for broad interpretation.

For example, it gives China the right to expropriate foreign investment “for the public interest”, which foreign business groups fear could be abused.

A construction site of a factory of the American automotive and energy company Tesla during a ground-breaking ceremony for the factory in Shanghai. – AFP

A draft law was first published for comment in 2015 but was quickly shelved until it resurfaced late last year, Wang said.

It was only submitted to China’s rubber-stamp legislature for a first reading on December 23, 2018, and made available for public comment until February 24. The top decision-making body of the legislature convened a special two-day session last Tuesday to debate another “updated version”, state news agency Xinhua reported.

The law will probably be approved during the Parliament’s roughly 10-day annual session which opens March 5, Wang said.

The clock is ticking on a March 1 US-set deadline for China to address trade concerns and avert an escalation in their tariff war.

“What we feel with this piece of legislation is that it’s been squeezed between the normal legal process and the negotiation table (to defuse) the trade conflict,” President of the European Union (EU) Chamber of Commerce in China Mats Harborn told AFP.

“In our view this is a little unfortunate because this is an important piece of legislation that will have an effect… on all foreign companies.”

Both the EU and American chambers of commerce in China said they rushed to submit feedback from members this week.

Although the legislation covers several pain points highlighted by United States (US) President Donald Trump including safeguarding foreign capital from government “interference”, it falls short in other key areas, the business lobbies said.