Actions required by China's State Council to boost foreign direct investments

Central and local governmental authorities required to facilitate Premier Li Keqiang’s requirement for encouraging foreign direct investment (FDI)

Following our article China Lays Groundwork for More Foreign Investment, published last week, documenting the initial legislative developments on FDI, the State Council has released the Notice Regarding Measures to Accelerate Increase of Foreign Investment (Guo Fa [2017] No. 39) on August 16, 2017 (the State Council Circular). The announcement quickly follows Premier Li Keqiang’s presentation at a State Council Executive Meeting on July 28, 2017.

Over 30 central governmental authorities¹, industry regulators² and all provincial level People’s Government are required to enact necessary regulations and take actions to facilitate and implement 22 specific missions in the State Council Circular. The highlights are as follows:

• To liberalise further foreign shareholding restrictions on certain industries, especially those that currently require a Chinese controlling position, no more than 50% foreign shareholding and investment in the form of joint venture. These industries include manufacturing of special use vehicles and clean energy vehicles, design of vessels, maintenance of aircrafts for trunk lines and regional aircrafts, international marine transportation, railway passenger transport, value-added telecommunications services, banks, insurance and securities etc.;
• To encourage roundtrip investment made by Chinese investors and grant tax benefits if they bring their profit/dividend derived from their overseas investment and tax benefits back to China;
• To provide financial support including capital support out of local financial budgets to encourage multinational companies to set up regional headquarters in China;
• To encourage foreign investment in service trade and manufacturing services;
• To enact new foreign investment legislations under which foreign invested enterprises (FIE) will be entitled to national treatment  in more areas;
• To secure free repatriation of profit and dividend out of China in Renminbi or freely convertible foreign currency;
• To encourage foreign investors to participate in State-owned enterprises reform and acquire domestic companies;
• To grant 5-10 years multiple entry visas and corresponding work permits, and resident permits to qualified expatriates;
• To simplify and streamline further FDI approval/filing procedures by sharing one online application system by both MOFCOM and SAIC;
• To establish complaint and claim mechanics, and offer more friendly administrative services to foreign investors;
• To require local governments to fulfil their commitments made to foreign investors and FIEs, and strictly perform investment contracts signed with foreign investors; and
• To take tougher administrative and legal actions against IPR infringement and violation of the IPR laws.

At least two specific authorities are designated to each of the 22 missions, with some requiring more than ten authorities to collaborate. There is no clear timeline for completion of above missions, but as expected by Premier Li, new policies are likely to be released individually in September 2017. We will pay close attention to the progress and provide further updates on new key regulations.