China's top legislature has just revised four laws regulating inbound investment. The revised Foreign Invested Enterprise Law will take effect on Saturday. The revisions amount to an easing of rules for foreign investors starting businesses across China. CCTV's reporter Ying Junyi talked to a lawyer and a foreign entrepreneur to see what they think about the changes.
Nokia closed its Shanghai factory in March. Philips decided in May to stop operations at a lighting equipment branch in Shenzhen, while Samsung has cut back its staff in China. China is no longer necessarily the top destination for foreign investors. A report by the UN Conference on Trade and Development last week testified to the slowing of foreign investment here.
During the G20 Summit at the beginning of this month in Hangzhou, Chinese leaders vowed to open markets further and more quickly in order to reverse the trend. Almost at the same time, China's top legislature was issuing the revised four laws regulating inbound investment.They will take effect on Oct.1 this year. Tang Yijun, Senior Partner of a Shanghai law firm, says that in the past he spent most of his time just helping clients deal with complicated government regulations, but that the revised laws should significantly improve the efficiency of doing business in the Chinese mainland.
For example, if a company wanted to change one of its three board members. Despite this being a minor change, the company would need to submit documents to the Ministry of Commerce, then to the industrial and commercial bureau, and the process could last for 2 to 3 months, and need a lot of documentation. From now on, companies operating in open industries need only register their decisions, and the registration can be in advance or afterwards. In another words, you don't need to wait for government approval to make changes.
This is related to the macro economy, I think. Unlike the past when foreign investors rushed into the Chinese market, some that are already here now are considering withdrawing due to the higher administrative, personnel, and logistics costs in China compared with Vietnam or Southeast Asian countries. The government has to cut red tape to convince foreign investors to stay.
In 2013 and 2014 the government began experimenting with red tape reduction with Free Trade Zones in Shanghai, Guangdong, Tianjin and Fujian. Foreign and Taiwan companies were allowed to set up in the zones with a simplified registration scheme -- the time required was cut to fewer than three days, instead of the previous three weeks.By the first half of 2016, nearly 5,000 foreign-funded firms had been established in the four FTZs, investing a total of over 350 billion yuan. The new laws aim to extend these favorable terms into the rest of China.
Restrictions do remain, however, when an outside company wants to invest in one of the restricted industries on China's negative list, such as oil exploration, or the desired investment amount exceeds levels set by the State Council. How do the remaining restrictions shake out for foreign firms? Dov Chreky has been in China for 14 years and set up eight companies here.
"I think if the process is a little complicated, will filter some companies that want to establish in China," said Asi Logistics' chariman Dov Chreky.
Chreky says most of his business associates feel the same way. His biggest headache working in China, he says, is taxation procedures, but he sees little improvement in that area from the new regulations.
"One of the difficult part today is when we need to move our company from one district to another district, the registration in the tax department, this process is quite complicated, I think it's impossible because following the actual regulation, we have to stop invoicing during 3,4,5,6 months, and this is impossible for our company."
Still working on problems like this, Chinese authorities decided in late August to set up seven new free trade zones, which will bring the nationwide total to 11 once they are established. There is no timetable for that, however.
