On January 1, 2020, the Foreign Investment Law and the Regulations on the Implementation of the Law on Foreign Investment and other laws and regulations on foreign investment officially came into force. On the same day, the Shanghai Market Supervision Administration issued the very first Business License for a Foreign-Invested Enterprise which is established with a Chinese natural person as one of the investors.

The license shows that the type of enterprise is "Limited Liability Company (foreign investment, non-sole proprietorship)", which means that the concept of "Sino-foreign Joint Venture" and "Sino-foreign Cooperation" has officially retired.

Given to this, I will sort out the seven points regarding "Regulations on the Implementation of the Law on Foreign Investment" on "Foreign Investment Law" provisions of the relevant Articles.

1. Clarifying the term "other investors" in the Foreign Investment Law

Foreign Investment Law

Article 2 This Law applies to foreign investment in the territory of the People's Republic of China (hereinafter referred to as "within the territory of China").Foreign investment mentioned in this Law refers to the investment activities of foreign natural persons, enterprises or other organizations (hereinafter referred to as foreign investors) directly or indirectly within the territory of China, including the following:

(1) Foreign investors set up foreign-invested enterprises in China alone or jointly with other investors;

(3) Foreign investors investing in new projects in China alone or jointly with other investors;

Regulations on the Implementation of the Law on Foreign Investment

Article 3 Other investors referred to in (1) and (3) of paragraph 2 of Article 2 of the Foreign Investment Law include natural persons in China.

2. Clarifying the policies and publicity supporting the development of the enterprise

Foreign Investment Law

Article 9 Foreign-invested enterprises may, in accordance with the law, equally enjoy the State policies concerning the support of enterprise development.

Regulations on the Implementation of the Law on Foreign Investment

Article 6 The government and its related departments shall treat foreign-invested enterprises and domestic-funded enterprises equally in accordance with the law in terms of government funding arrangements, land supply, tax and fee reductions, qualification permits, standard formulation, project declaration, and human resources policies.

3. Clarifying the way of soliciting opinions and suggestions of foreign-invested enterprises

Foreign Investment Law

Article 10 Before the formulation of laws, regulations and rules related to foreign investment, appropriate measures shall be taken to solicit opinions and suggestions from foreign-invested enterprises.

Regulations on the Implementation of the Law on Foreign Investment

Article 7 The formulation of administrative regulations, rules, and regulatory documents related to foreign investment, or draft laws and local regulations related to foreign investment by the government and its relevant departments, in accordance with the actual situation, it shall take various forms such as soliciting written opinions, holding seminars, demonstrative meetings, and hearings, and soliciting opinions and suggestions from foreign-invested enterprises and related chambers of commerce and associations.

Opinions and suggestions on issues that widely reflected or involve significant rights and obligations of foreign-invested enterprises, shall feed back the adoption of the opinions through appropriate manners.

4. Clarifying that participation for foreign-invested enterprises equally in the setting of standards in accordance with theLaw

Foreign Investment Law

Article 15 The State ensures that foreign-invested enterprises have equal access to the standard-setting work according to law, and strengthens information disclosure and social supervision regarding standard-setting.

Regulations on the Implementation of the Law on Foreign Investment

Article 13 Foreign-invested enterprises can participate in the setting and revision of national standards, industry standards, local standards, and group standards on an equal basis with domestic-invested enterprises in accordance with laws. Foreign-invested enterprises may set enterprise standards on their own or jointly with other enterprises.

5. Clarifying that foreign investors are free for foreign exchange in China

Foreign Investment Law

Article 21 Foreign investors' capital contribution, profits, capital gains, assets disposal income, intellectual property license fees, legally obtained damages or compensation, liquidation proceeds, etc., may be freely remitted to overseas in RMB or foreign exchange according to law.

Regulations on the Implementation of the Law on Foreign Investment

Article 22 Foreign investors' capital contributions, profits, capital gains, income from asset disposal, intellectual property right royalties, compensation or indemnification obtained in accordance with law, liquidation income, and so forth, that are made or obtained in mainland China, may be freely transferred into or out of mainland China in RMB or foreign exchange in accordance with law; and the currency, amounts, and frequency of import or export, must not be restricted by any unit or individual.

The salary and other lawful income of foreign national staff of foreign-invested enterprises and the staff of Hongkong, Macau, Taiwan may be freely remitted.

6. Clarifying a system for foreign investment information reporting

Foreign Investment Law

Article 34 The State establishes a system for foreign investment information reporting. Foreign investors or foreign-invested enterprises shall submit investment information to the competent commerce departments through the enterprise registration system and the enterprise credit information publicity system.

Regulations on the Implementation of the Law on Foreign Investment

Article 38 Foreign investors or foreign-invested enterprises shall submit investment information to the competent departments for commerce through the enterprise registration system and the enterprise credit information publicity system.

The State Council departments for commerce and market supervision and administration are to complete connections and work linkages between related business systems and provide guidance for foreign investors or enterprises with foreign investment in submitting investment information.

7. Clarifying "Five-year transition period"According to the Article 42 of Foreign Investment Law and Article 44 of Regulations on the Implementation of the Law on Foreign Investment, once the Foreign Investment Law comes into effect, the original law on foreign-funded enterprises shall be abolished at the same time.

The Foreign Investment Law has set up a "five-year transitional period", that is, if a foreign-invested enterprise is established before the enforcement of this law, the original enterprise organization form can be retained or adjusted and changed in accordance with the Company law and the Partnership Enterprise Law within five years after the implementation of this law.

However, after the expiration of 5 years, if the relevant procedures are not handled to change, the relevant departments will not handle the other registration matters applied for, and the relevant circumstances will be publicized.

The promulgation and implementation of the Foreign Investment Law and the Regulations on the Implementation of the Law on Foreign Investment are of milestone to provide a clearer institutional framework for foreign investors, and it is believed that foreign investment will have a broader prospect in the Chinese market.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.