Protection of Foreign Investment in China: The Foreign Investment Law and the Changing Landscape

Abstract

China’s foreign investment law regime has experienced significant changes in recent years. A milestone came with the passing of the Foreign Investment Law (FIL) in 2019, replacing the laws and regulations that had governed foreign investment in China for four decades. This article first undertakes a political economic analysis to determine the relevance of internal and external factors contributing to the changes. It then discusses the key characteristics of the FIL and reveals how it is designed to create a liberal, stable, fair, transparent and accountable regime to promote and protect foreign investment. Although the passage of the FIL ushered in a new era of foreign investment in China, many important issues remain unresolved and further actions must be taken to ensure its smooth implementation. To support the sustained development of its foreign investment regime, China must address existing laws and regulations that are incompatible with the new regime, clarify key issues that the new law fails to address, issue clearer guidance on national security, shorten its ‘negative list’, promote opening up and enhance regulatory transparency.