New Foreign Investment Law takes hold

Now that 2020 is 15 days old, and the US and China have a deal (sort of) on trade, it might be time to shake off the New Year’s hangover and knuckle down to understanding the opportunities available to investors in the world’s 11th-largest economy.

A good way to start would be to read the Foreign Investment Law, which went into effect on January 1. It brings in some major changes in how foreign investors are treated, offering increased protections. For new investors, it makes it a lot easier to incorporate and navigate the bureaucratic minefields, although it is still important to understand the different company structures available to foreigners, which can vary depending on the industry. It also opens new sectors of the economy to foreign investment and, particularly, opens the Belt and Road Initiative to foreign capital.

However, the new law also requires some knowledge of how to restructure existing operations to become compliant. There is a five-year transition period, fortunately, yet this has deadlines for specific things to get done. There are also many other practical considerations to address, especially for those looking at taking advantage of incentives provided by local governments. Those tax breaks and other subsidies that appear too good to be true? They may just be, and could be subject to revision by the central government anyway. 

It might be a good idea to talk to someone who really knows what’s involved with setting up businesses in China. One of the best we have come across is a homegrown GBA international law firm, founded in Shekou, Shenzhen: Dezan Shira and Associates. They have regular newsletters worth subscribing to, and they publish regular updates on the FIL and other laws and regulations on their website.

Here is a link to their most recent update on the FIL, and here is another one to their explanation of what the FIL means for foreigners in the BRI. Both have links to their subscription page.

Tell us what you think