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Foreign Investment Law in China

After years of deliberation, the PRC National People‘s Congress issued the PRC Foreign Investment Law (“FI Law”) on 15 March 2019. The law will enter into effect on 1 January 2020 and will – among others – apply to all foreign investment enterprises (“FIEs”) within the territory of the PRC.

Once entering into effect, the FI Law will be the comprehensive law governing foreign investment activities in the PRC. Forthwith, the PRC Wholly Foreign-Owned Enterprise Law (“WFOE Law”), the PRC Sino-Foreign Equity Joint Venture Enterprise Law (“EJV Law”) and the PRC Sino-Foreign Cooperative Joint Venture Enterprise Law (“CJV Law”) will be abolished.

The issuance of the FI Law corroborates the trend of unifying the legislation for domestic and foreign investments in China.

Once in effect, the FI Law will adjust the corporate legal framework governing FIEs in many aspects, some of which will materially impact on the operation of the existing FIEs and some of which will impact the strategy applied by foreign investors to enter the PRC market.

For existing FIEs the FI Law provides a five years transition period (counted as of 1 January 2020 and hence lapsing on 31 December 2024) to adjust their corporate governance to the new system of the FI Law.

Since the FI Law is a very simple and short piece of legislation, many aspects of the actual application will be subject to (yet to be published) specific implementing measures.

This publication is hence designed to summarise the key points of the FI Law. At the same time, one shall closely monitor the issuance of the specific implementing measures of the FI Law.


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