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China quickly tracks new foreign investment laws as US negotiations loom



BEIJING (Reuters) – In March, China's parliament will vote on a new foreign investment legislation that will ban forced technology transfer and illegal government "interference" in foreign business practices, reported the official news agency Xinhua on Wednesday.

FILE PHOTO: Chinese President Xi Jinping delivers his speech at the National People's Congress (NPC) ending at People's Great Hall in Beijing, China, March 20, 2018. REUTERS / Damir Sagolj

Time The table suggests that the law is likely to be formally endorsed by the largely rubber stamp legislator, which is speeding up a process that would normally take a year or more when Beijing rushed to meet Washington's demand to de-escalate their trade war.

The full annual parliamentary opening, which opens on 5 March, tends to pass only selected legislative legislation while other laws are adopted by its standing committee.

Parliament is unlikely to reject the law as its delegates are elected to their loyalty to the ruling Communist Party and its agenda.

The Trump administration has accused Beijing of intellectual property rights (IP) theft and forced IP transfers, demanding changes and threatening additional tariffs as the trading gap spread between two countries last year. China has repeatedly rejected such accusations.

The two sides will hold two-day talks in Washington, starting Wednesday in the highest-level talks, since US President Donald Trump and Chinese President Xi Jinping adopted a 90-day truce in their trade war in December.

The decision to speed up the legislative process came after the NPC Standing Committee convened a special two-day session this week to conduct another review of the draft.

The first draft of the law was presented on 23 December with the draft made available to the public for comment until 24 February.

There is an "urgent need" for such a law to be passed as current legislation "barely able to cope with the changing demands of building a new open economy system", Justice Minister Fu Zhenghua was quoted by Xinhua.

Once adopted, the law replaces the three existing laws governing joint ventures and wholly foreign-owned enterprises.

The most recent law of the law was broadly in line with the first draft, which contained 39 articles with a particularly stronger IP protection, with definitions of the conditions of "pre-establishment national treatment" and "the negative list" added to ensure clarity, Xinhua reported.

The new draft also provided for penalties for failure to report their investment information to related authorities.

It is unclear whether the second draft of the law will be made available to the public for comment, which could derive the process.

Some lawyers and business consultants have expressed skepticism about how far the law would protect the interests of foreign companies, as there was a general lack of rule of law in China.

In October, nearly 950,000 foreign-funded companies were registered in China, accounting for over 2.1 trillion investments, according to Xinhua.

Reporting by Yawen Chen and Ryan Woo; Further reporting by Ben Blanchard; Editing by Simon Cameron-Moore & Kim Coghill

Our Standards: Thomson Reuters Trust Principles.

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