China Issues Foreign Investment Guidelines
On August 15, the Chinese State Council (essentially, the Chinese cabinet) released new guidelines titled “Opinions on increasing efforts to attract foreign investment.”1 While these guidelines are not binding on the Chinese government, they provide insight into coming legal and regulatory priorities from the government, as quarterly foreign investment in China hit a 25-year low earlier this year.2
The guidelines provide 24 specific measures aimed at implementing six overarching goals. The goals are: improve the quality of foreign capital; guarantee national treatment for foreign enterprises; strengthen protections for foreign investments; improve investment facilitation; increase fiscal and tax support for foreign investments; and improve promotion methods to attract foreign capital.3 The guidelines specifically name “major scientific research projects” and biomedicine as areas of particular interest with respect to foreign direct investment, outlining proposals to create “research and development centers” dedicated to these sectors.4 The guidelines also propose legal and regulatory updates to improve intellectual property protection for foreign companies investing in China, make it easier for foreign companies working in China to transfer data back to their home country, and improve immigration restrictions for employees of foreign corporations investing in China seeking temporary residence permits and entry visas.5 “Made in China” and other procurement requirements may also be updated to clarify the role of foreign companies investing in China, according to the guidelines, and the guidelines encourage foreign companies to report discriminatory treatment with respect to Chinese companies.6 Finally, from a tax perspective, the guidelines provide new incentive programs for foreign companies investing in China, including a temporary exemption withholding income tax for foreign companies that use profits to reinvest in China.7
Chinese investment groups welcomed the proposals, but wanted to see progress toward implementation. President of AmCham China Michael Hart noted that the policies related to tax and data transfers were areas where the organization has called for reform.8 However, he also told Bloomberg, “The next area to watch is the actual implementation of announced policies which is sometimes where the real challenges lie.”9
Companies with investments in China should carefully watch new regulations in China to see if the Chinese government proceeds with the foreign investment framework outlined in these guidelines.
1 https://www.gov.cn/zhengce/content/202308/content_6898048.htm (full text of the guidelines, Chinese language only).
2 https://insidetrade.com/daily-news/beijing-issues-guidelines-aimed-increasing-flagging-foreign-investment
5 https://www.bloomberg.com/news/articles/2023-08-13/china-issues-plan-to-further-attract-foreign-investment
6 https://insidetrade.com/daily-news/beijing-issues-guidelines-aimed-increasing-flagging-foreign-investment
7 https://www.reuters.com/markets/asia/china-state-council-says-it-issues-guidelines-optimise-foreign-investment-2023-08-13/
8 https://www.bloomberg.com/news/articles/2023-08-13/china-issues-plan-to-further-attract-foreign-investment
