What’s going on here?
China has passed new foreign investment laws aiming to ease global concerns.
What does this mean?
The passing of China’s new Foreign Investment Law, which is set to make inbound investment into China much easier, is a clear attempt to limit damage in the escalating trade battle between China and the USA. Due to come into effect in January 2020, the move is seen by many as an attempt to make peace with the US as their “trade war” negotiations continue.
What’s the big picture effect?
China-US trade relations are problematic at the moment. In 2017 President Trump initiated an investigation of China’s trade policies. After that, the US imposed three rounds of tariffs on Chinese goods, beginning what has been called "the largest trade war in economic history”. However, China has inevitably retaliated with tariffs on US imports.
This new batch of legislation (which aims to level the playing field between domestic and foreign businesses) appears to be an attempt to calm the storm. The American Chamber of Commerce in China has acknowledged it as an “effort to improve the foreign investment climate.” However, the fact that some of these new provisions are “too general” means that a number of the persistent concerns of foreign companies may go unaddressed. Thus, there could be concerns among the business community that the new law simply represents a catalogue of good intentions, rather than specifically enforceable safeguards.
Linklaters’ recent report on the Foreign Investment Law has heralded it as an “unprecedented opportunity”. They suggest that China’s Foreign Investment Law will lead to a potential tripling of inbound investment over the next 10 years - reaching $1.5 trillion in inbound M&A activity!
Just what it will do to calm the feverish climate that surrounds these countries remains to be seen, though first indications certainly seem upbeat.
Report written by Mark P.
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