Legal protections make nation more attractive place to conduct business, spur commerce

Employees work on a Schneider Electric production line in Beijing in February. (CUI JUN / FOR CHINA DAILY)

BEIJING — Since the outbreak of the COVID-19 pandemic some three years ago, the confidence of global investors has been dented by mounting uncertainties. However, China has remained a strong magnet for global investors over the past three years, with the country's landmark Foreign Investment Law offering a powerful guarantee for law-based opening-up.

On Jan 1, 2020, the world's second-largest economy enforced the milestone law, which includes a comprehensive and fundamental set of legal standards for foreign investors and aims to better protect their rights and interests. With the law in effect for three years now, the growing appeal of the Chinese market can be seen in the clear signs of foreign capital inflows.

Foreign direct investment into the Chinese mainland, in actual use, totaled 999.98 billion yuan ($147.6 billion) in 2020 and jumped to 1.15 trillion yuan in 2021, said the Ministry of Commerce.

In the first 11 months of 2022, FDI inflow expanded 9.9 percent year-on-year to nearly 1.156 trillion yuan, guaranteeing that China would secure a record FDI inflow for another year.

"The Foreign Investment Law ensures China's investment environment and foreign investment system in legal form and plays an important role in stabilizing the confidence of multinational companies in China, as the world faces slower economic growth and surging inflation," said Zhao Beiwen, deputy director of the Institute of World Economy under the Shanghai Academy of Social Sciences.

Better legal protection

With unified provisions for the entry, promotion, protection and management of foreign investment, China's Foreign Investment Law addresses foreign firms' concerns and provides facilitation and ease for foreign investment.

China has stressed a level playing field for domestic and foreign companies, banned forced technology transfers and improved the mechanism for foreign-invested firms to file complaints, according to the law and its implementing regulations.

Hence, foreign-invested enterprises continue to expand their footprint in China, with an average of 43,000 foreign-invested enterprises newly established each year in 2020 and 2021, according to the MOC.

As of the end of September 2022, a total of 455,000 foreign enterprises were registered, and more than 2,000 regional headquarters and research and development centers of multinational companies had been set up in China, the ministry said.

A view of GLP's booth during the third China International Import Expo in Shanghai in November 2020. The Singapore-based company serves as a global real estate logistics provider and investment manager. (PHOTO PROVIDED TO CHINA DAILY)

In November last year, Schneider Electric set up its fifth-largest research institute in China.

"China's economy is bursting with new growth vitality and posts huge market potential," said Yin Zheng, executive vice-president of Schneider Electric and president of Schneider Electric China.

"Foreign enterprises, especially high-tech foreign-invested enterprises, pay more attention to intellectual property protection than labor-intensive ones. The Foreign Investment Law has ensured a fair competition environment with rules and transparency," Zhao said, adding that the protection of intellectual property rights has boosted China's attractiveness for foreign capital inflow.

From January to November 2022, FDI in high-tech manufacturing surged 58.8 percent from the same period of the previous year, while that in the high-tech service sector rose 23.5 percent year-on-year, the MOC added.

Broader opening-up

China has implemented the model of pre-establishment national treatment plus a negative list for foreign investment, according to the Foreign Investment Law.

Zhao said the moves were part of China's broader institutional opening-up efforts and demonstrated China's transition to actively integrate into international economic and trade systems.

"It shows China's determination to shift from commodity and element opening-up to rule-based opening-up in the form of laws and regulations," Zhao added.

In 2022, China fully implemented the shortened negative list for foreign investment, expanded the encouraged investment catalog and added more cities to the pilot program of opening the service sector.

From 2020 to 2022, China dropped laws, regulations and normative documents inconsistent with the Foreign Investment Law, and promoted the establishment, revision and abolition of more than 500 documents, said the National Development and Reform Commission.

A survey by the MOC and www.gov.cn questioning 3,130 foreign firms showed that the implementation of the Foreign Investment Law has boosted expectations and confidence in the Chinese market among nearly 90 percent of respondents.

GLP, a global investment manager and business builder in logistics, data infrastructure, renewable energy and related technologies, has seen its business volume continuously expanding, with assets under management in China hitting $72 billion.

"GLP has witnessed a continuous improvement of the business environment in China, with higher level of internationalization and opening-up," said Zhuge Wenjing, executive vice-chairperson of GLP China. "Our business has achieved sound growth as the country continues to deepen reform and opening-up."

The annual Central Economic Work Conference held in mid-December last year reaffirmed China's resolve on opening-up at a higher level.

The country will make greater efforts to attract and utilize foreign capital, widen market access, promote the opening-up of modern service industries, and grant foreign-funded enterprises national treatment, it was decided at the meeting.

"The conference stressed efforts to attract and utilize foreign capital and made precise arrangements. It is unprecedented in my memory," said Long Guoqiang, deputy head of the Development Research Center of the State Council, China's Cabinet.

On improving the business environment, Long said that more should be done to align high-standard economic and trade rules, and steadily expand institutional opening-up regarding rules, regulations, management and standards.