Fashion Law in China

Chapter One - Introdution of Foregin

Investment Law System in China

PRC Foreign Investment Law

The two has built the basic law system of

foreign investment in China.
Implementing Regulations on PRC
Foreign Investment Law

Measures on Strategic Investment

It has provided on how foreigners can invest in
by Foreigners to Chinese Public Chinese public listed companies.
Listed Companies

Rules on Merger and Acquisition

of Chinese Enterprises by Foreign It has provided on the rules how foreigners can
invest in Chinese companies through merger
Investors (enacted by Ministry of and acquisition.
Commerce)

Regulations on Approval and

Recording of Projects Invested by
Enterprises These are the implementing rules on
supervision of projects investment made by
enterprises. It both apply to Chinese
companies and foreign companies.

Measures on Post- Supervision of

Projects Invested by Enterprises

Notice on Implementing PRC

Foreign Investment Law for
Registraton of Foreign Invested
Enterprises The two have provided the system of
registration of foreign invested companies.

Regulations on Registration of
Market Entities

Regulations on Optimizing As displayed in its name, the Regulaitons aim

Business Environment to improve business environment of China.

Measures on Information
​报告事项清单
Reporting of Foreign Investment

Regulations on Security It has provided on what should be inspected

when national security is concerned in a
Inspection of Foreign Investment foreign investment project.

This is chapter one of the introduction of foreign investment law system of

China. It consists of the following subjects:
1. Foreign Investment Law System in China;
2. Key rules of PRC Foreign Investment Law which sets up the fundamental
system of foreign investment law;
3. What protections foreign invesment can obtain in China;
4. What compliance’s rules foreign investment should observe.

It is a part of my book Fashion Law in China.

Apeng Shang
 Fashion Law in China

Chapter Two - PRC Foreign

Investment Law - Key Points

Article 2 Keyp points: other

investors. It includes the “Chinese
natural persons”.

In the past, Chinese natural persons were

not allowed to be an investor of a sino-
foreign joint venture. Now this rule
changed. Chinese natural persons can be
an investor of the joint venture.

Article 2 Investment Activities

This article has provided that the forms of

foreign investment can be one of the
following:
1. direct investment (WFOE and Sino-
foreign joint ventures),
2. merger and acquisition of Chinese
enterprises,
3. investment in new projects and,
4. other forms which are permitted by law.

Here “new projects” refer to those projects

in which
1. parties involved in build their relations
through contracts/agreements,
2. The projects may be the ones to explor
natural source or to develop large
infrastructure construction.

Article 4 Pre-entry national

treatment and negative list

Pre-entry national treatment is defined as

treatment given to foreign investors at the
stage of entry in which the investment
standards are not lower than that of
domestic investors and their investments;
the negative list refers to state regulations
for foreign investment in specific areas to
include special management measures for
investment implementation approval. The
state shall ensure equal national treatment
to foreign investment excluded from the
negative list.

Currently the effective negative list is

Special Admin Measures for Foreign
Investment access into China (2021).

Article 9 equal application of

China’s supporting policies

This article has provided that all the policies

that the government has made to support
the development of enterprises shall be
equally applied to foreign invested
enterprises.

Article 10 Opinions from FIE are

to be respected

This article has provided that the legislative

organizations shall solicit opinions from
foreign invested enterprises when it comes
to the legislation of lawns and regulations
concncering foreign investment.

This article has provided that all the judicial

verdicts related to foreign investment shall
be disclosed to public. It is a judicial rule in
China that all the judicial verdicts shall be
open to public. Here it is a restatement of
national treatment.

Article 13 Special promotion to

foreign investment

This article has provided that the state will

set up special economic zones when it is
necessary or implement pilot policies to
promote foreign investment in some areas.
It shows that China will continue to
welcome foreign investment into the
country; the pilot policies may be
preferential to foreign invesment.

Article 14 Guidance and prefential

treatment

This article provided that the state will

encourage and guide foreign investment to
certain areas and industries; meanwhile
foreign investment may enjoy preferential
treatment that is provided by laws and
regulations.

Article 15 Equal engagement in

standards making

This article has provided that foreign

invesment has the rights to join the process
of standards building of industries.

Article 16 Equal engagement in

public procurement

This article has provided that foreign

invested enterprises has the right to equally
take part in public procurement. This is a
restatement of national treatment.

Article 17 Financing in China

This article has provided that foreign

invested enterprises may do its security
financing by IPO and bonds in the Chinese
market.
It is restatement of national treatment.

Article 20 No levy

This article has provided that the state shall

not impose levy on foreign invested
enterprises.
Even if levy is necessary in situations, for
the sake of public interest, reasonable
compensation shall be given.

Article 21 Free entry and exit of

capital and profit

This article has provided that the capital

that foreign investors has paid and the
profit that foreign investors has obtained
from the investment activities is allowed to
be remitted out of China.

Article 22 Protection of
Intellectual Properties

This is a restatement of national treatment.

There are PRC Trademark Law, PRC
Copyright Law and PRC Patent Law that
protects the benefit of all enterprises
including the foreign investment ones.

Article 23 Protection of business

secrets

This article has provided that administrative

organs and its staff members shall keep
confidential on the business secrets of
foreign invested enterprises if they has
obtained such business information in
communication with foreign invested
enterprises.

China is in the legistration process of

Business Secrets Protection Law. Before it
is enacted, there are administrative rules
that protect the business secrects of
enterprises.

Article 25 Policies commitment

should be carried out

This article has provided that the policies

commitment made by local government to
foreign invested enterprises shall be carried
out. Even if the commitment should be
amended due to national interests, the
amendment shall be made in the legal
procedures and reasonable compensation
shall be made to the foreign invested
enterprises.

Article 31 Corporate Structures

This article has provided that the structures

and operating procedures of foreign
invested enterprises shall be subject to the
provisions of PRC Company Law and PRC
Patnership Enterprises Law.

In the past the structures and operating

procedures of sino-foreign joint ventures
and sino-foreign contractual ventures are
different from those under Company Law.
After the Foreign Investment Law becomes
effective, foreign invested enterprises shall
practice in the structures and under
operating procedures of Company Law and
Partnership Enterrpises Law.

Article 33 Concentration of
operators

This article has provided that If a foreign

investor acquires a Chinese domestic
enterprise or participates in the
consolidation of other business operators in
other ways, it must comply with anti-
monopoly assessments of the business
operator in accordance with the provisions
of the Anti-Monopoly Law of the People's
Republic of China.

Concentration of operators usually engage

in business over billions. Therefore
common investment won’t come to this
problem unless the investment is especially
huge.

Article 34 Reports to be made

This article has provided that the foreign

invested enterprises should make reports to
administrative offices in due procedures.

In the past the foreign invested enterprises

need to go through annual joint inspection
by several administrative offices; many
reports had to be provided and many
administrative offices were involved. Now
the new reporting system has made things
simplified.

The detailed procedures of report is

provided in the Administrative Meassures
on Matters to Be Reported by Foreign
Invested Enterprises. According to the
Measures, following subjects should be
reported to relevant offices:
1. Setting up of a foreign invested
enterprises;
2. Key changes of the enterprises, such as
changes of investors/shareholders,
directors of the board, general managers,
business scope and etc;
3. Annual business summary.

Article 35 When national

securities are concerned

This article has provided that foreign

investment should go through security
review for approval when the investment is
concerned with national security.

The implementing rules of the above article,

Measures on Security Review of Foregin
Investment, has provided on what subjects
should go through national security review.
When the foreign investment is concerned
with military, important agricultural
products, important infruscture
constructions, important cultural products
and services, important technologies and
internet products as well as import financial
services.

Investment on the aforesaid subjects should

go through security review before the
investment is approved.

This is chapter two of the introduction of foreign investment law system of

China. It consists of the following subjects:
1. Foreign Investment Law System in China;
2. Key rules of PRC Foreign Investment Law which sets up the fundamental
system of foreign investment law;
3. What protections foreign invesment can obtain in China;
4. What compliance’s rules foreign investment should observe.

It is a part of my ebook Fashion Law in China.

Apeng Shang
 Fashion Law in China

Chapter Three - What protections are

available for Foreign Investment

Investment

No Levy

According to article 20 of PRC Foreign

Investment Law, no levy shoul d be imposed
on foreign invested companies and/or
foreign invested projects; even though levy
occurs in extreme circumstances, it should
be made under legal procedures and
reasonable compensation should be
provided.

Profit and gains are to be remitted out of

China freely.

According to article 21 of PRC Foreign

Investment Law, the profits and gains of
foreign investors may be freely remitted out
of China.

Policy commitments should be kept.

According to article 25 of PRC Foreign

Investment Law, if local government offices
make policy commitments on foreign
investment, they should carry out such
commitments; reasonable compensation
should be made if such commitments are
not carried out.

Intellectual Property

General Principles

According to article 22 of PRC Foreign

Investment Law, the intellectual property of
foreign investors are protected by the laws
and regulations of China.
Collaborations on technologies between
foreign investors and Chinese parties are
encouraged and such collaborations should
be made on the basis of fairness. No
administrative offices or people should
force foreign investors to transfer
technologies by administrative pressures.

PRC Patent Law

PRC Trademark Law

PRC Copyright Law

Business Secrects

According to article 23 of PRC Foreign

Investment Law, all the business secrets
disclosed to administrative offices should
be kept confidential.

Foreign invested companies have worked

for years to promote the legislation of PRC
Business Secrects Law. At now a draft of
Regulations on Business Secrets Protection
is in the process of soliciting opinions from
public. Once the Regulations are enacted,
a better protection on business secrects
will be provided on business secrects.

Anti Unfair Competition

The PRC Anti Unfair Competition Law

provided protections on intellectual
properties and business secrets when such
matters are not covered by intellectual
property laws.

This is chapter three of the introduction of foreign investment law

system of China. It consists of the following subjects:
1. Foreign Investment Law System in China;
2. Key rules of PRC Foreign Investment Law which sets up the
fundamental system of foreign investment law;
3. What protections foreign invesment can obtain in China;
4. What compliance’s rules foreign investment should observe.

It is a part of my ebook Fashion Law in China.

Apeng Shang
 Fashion Law in China

Chapter Four - Rules That Foreign

Investment Should Comply with

Routing reports

Routine reports should be made according

to the Measures on Information Reporting
of Foreign Investment.

Compliance in general

Labor and employment

Matters on labour, employment and social

insurance of employees should be in
compliance with the PRC Labor Law and
PRC Labor Contract Law.

Anti-Trust

Enterprises should comply with the rules of

anti-trust in developing their business
according to the PRC Anti-Trust Law.

Anti Unfair Competition

Enterprises should comply with the rules of

anti unfair competition according to the
PRC Anti Unfair Competition Law.

Anti Business Bribery

Enterprises should prevent from business

bribery according to relevant rules of PRC
Criminal Law and other regualtions.

Individual Information

Enterprises should comply with the rules of

PRC Individual Information Law.

Data Security

Enteprises should comply with the rules of

PRC Data Security Law.

Compliance in specific business

fields and specific industries

Cross Boarder E-Commerce

Enterprises engaging in cross boarder e-

commerce should comply with a series of
rules ranging from tax, intellectual property,
products quality, foreign currency and etc.
Zhejiang Jiang E-Commerce Commission
has provided a white paper on this issue,
which is a good guidance to enterprises.

National Security Review

It doesn’t occur unless the foreign

investment is huge and concerns important
products/services of the following fields:
military, IT, cultural industry and/or
financial industry.

Compliance rules for specific industries

such as costimic products, medicines and
medical device, food, hotel, telematics,
online games…

There are a series of rules and regulations

for these industries. I will explain them in
the later chapters.

This is chapter four of the introduction of foreign investment law system of

China. It consists of the following subjects:
1. Foreign Investment Law System in China;
2. Key rules of PRC Foreign Investment Law which sets up the fundamental
system of foreign investment law;
3. What protections foreign invesment can obtain in China;
4. What compliance’s rules foreign investment should observe.

It is a part of my ebook Fashion Law in China.

Apeng Shang