CBL Introduction
CBL’s translation of the Administrative Regulations to the Foreign Investment Act describes the regulatory regime governing FDI in China, legal rights of foreign investors, ensuring equitable treatment in realms of governmental funding, tax reductions, and labor policies. A pertinent part of these regulations not previously addressed in the Foreign Investment Act, but that is highly essential, is an additional rule providing the circumstances under which the government may take the property of foreign investors.

Administrative Regulations to implement the Foreign Investment Act of People’s Republic of China

(Passed at the 74th State Council Executive Meeting on December 12, 2019, released in Decree 723 of the State Council of the People’s Republic of China on December 26, 2019, and shall be effective as of January 1, 2020)

Chapter I General Provisions

Section 1 These regulations are made pursuant to the Foreign Investment Act of the People’s Republic of China (hereinafter referred to as the “Foreign Investment Act”).

Section 2  The State encourages foreign investment attraction, the protection of foreign investors’ legal rights, foreign investment reporting administration, and the continuous optimization of the foreign investment environment in China to advance overall internationalization efforts.

Section 3 “Other Investors” as provided in Article 2 (1) and (3) of the Foreign Investment Act include Chinese natural person investors.

Section 4 The Foreign Investment Access Exception List (hereinafter referred to as the “Exception List”) shall be jointly drafted by the investment and commerce agencies under the State Council and other appropriate agencies, and shall be issued by the same or directly by the State Council following approval.

The Exception List may be further amended based on future internationalization and socioeconomic development needs. Any changes to the Exception List shall comply with the preceding rules.

Section 5  The jurisdictional commerce and investment agencies under the State Council and other appropriate agencies shall be responsible for coordinating foreign investment attraction, rights protection, and administration based on their respective duties.

Government bodies at or above the county level will be responsible for improving foreign investment attraction guidance, protection, and administration, supporting and overseeing other agencies responsible for the same pursuant to law and their respective duties, and coordinate the resolution of any material issues related to foreign investment attraction, protection, and administration.

Chapter II Investment Attraction

Section 6  Domestic and foreign owned business entities shall receive the same treatment with respect to government funding arrangements, land supply, tax reductions, certification, establishing standards, project applications, and labor policies.

Any policies issued by the government or appropriate agencies to support industry development shall be announced pursuant to law, and both domestic and foreign owned entities shall be subject to the same conditions, processes, and time limits necessary for the implementation of such policies.

Section 7 The government and appropriate agencies shall solicit written opinions and hold seminars, debates, and hearings to gather feedback and recommendations from foreign owned entities, industry chambers and associations, and other stakeholders when drafting new administrative regulations, rules, and regulatory documents, and shall provide appropriate responses to any comments or recommendations on matters involving major rights and obligations for foreign owned entities.

Regulatory documents related to foreign investment must be published in a timely manner, and any documents awaiting publication may not be used as the basis for administrative decision. The period between publication and effectiveness of regulatory documents governing foreign owned entity production and business activities shall be reasonably determined as needed.

Section 8 Government bodies at all levels shall continuously develop and optimize foreign investment services following the principle of government leadership and public participation.

Section 9 The government and its appropriate agencies shall publish all statutes, regulations, regulatory documents, and policies governing foreign investment and foreign investment projects on the government website and the comprehensive online service portal, and shall also provide information and guidance services for foreign investors and foreign owned entities to improve their awareness and understanding of such.

Section 10 The Special Economic Zones mentioned in Article 13 of the Foreign Investment Act refer to those specific zones approved by the State to trial more comprehensive internationalization policies and actions.

Any such experimental policies proven to be effective in these zones may be implemented in other areas or nationwide as actually needed.

Section 11 The central government will create a list of industries where foreign investment is encouraged, and will include specific industries, fields, and areas based on national socioeconomic development needs. This list of industries shall be jointly prepared and issued by the investment and commerce agencies under the State Council and other appropriate agencies following State Council approval.

Section 12 Foreign investors and foreign owned entities may enjoy preferential treatment in government funding, taxes, financing and leasehold pursuant to law, administrative regulations, and State Council regulations.

Foreign investors reinvesting income from their mainland China investments within China are entitled to such preferential treatment pursuant to law.

Section 13 Both foreign owned and domestic owned entities shall participate equally in establishing national, industry, local, and association standards pursuant to law. Foreign owned entities may develop their own organizational standards independently or together with other entities as necessary.

Foreign owned business entities may recommend new standards to the jurisdictional standards agency and other appropriate agencies, submit comments and opinions during the standard development, drafting, and technical review processes, and are also entitled to participate in the drafting, technical review, and translation of new standards pursuant to the regulations.

The jurisdictional standards agency and other appropriate agencies shall develop and optimize the procedures necessary to improve standard publication and revision transparency, and improve information disclosure throughout the overall standards publication and revision process.

Section 14 National mandatory standards shall equally apply to domestic and foreign owned entities, and foreign owned entities shall not be subjected to additional technical requirements beyond those covered in mandatory standards.

Section 15 The government and its agencies shall not impede or restrict foreign owned entities’ free access to the government procurement market within the region or the industry.

Government purchasers or agencies shall not subject foreign owned entities to disparate or discriminatory treatment in the publication of government procurement information, determination of supplier conditions, or bid evaluation criteria. There shall be no restrictions on ownership structures, entity forms, shareholding structures, investor nationality, or product or service brands, and there shall be no discrimination against products and services provided by Chinese entities that are foreign owned.

Section 16 Foreign owned entities are entitled to inquire and question purchasers and procurement agents on government procurement matters and file complaints with government procurement regulatory agencies in accordance with the Government Procurement Law of the People’s Republic of China (hereinafter referred to as the “Government Procurement Law”) and its administrative regulations. Purchasers, procurement agents, and government procurement regulatory agencies will be required to provide a response or decision within the specified time limit.

Section 17 The government procurement regulatory agency and other appropriate agencies shall improve government procurement oversight and inspection and resolve any violations involving disparate or discriminatory treatment of foreign owned business in accordance with applicable law.

Section 18 Foreign owned entities may raise capital in China through public offerings or the issuance of corporate bonds and other securities, as well as through public or private offerings of other financial instruments and cross-border financing pursuant to law.

Section 19 The local government at or above the county level may issue policies and measures, such as for fee waivers, zoning regulations, and public services, to attract and facilitate foreign investment pursuant to law, administrative regulations, and local regulations within their statutory authority.

Local governments at or above the county level shall implement policies and measures to attract and facilitate foreign investment with a focus improving economic development and socioeconomic conditions while optimizing the foreign investment climate.

Section 20 Jurisdictional agencies shall prepare and publish foreign investment guidelines and provide services for foreign investors and their entities. These foreign investment guidelines should include a description of the investment climate, foreign investment operations manuals, information on investment projects and data, and be regularly updated.

Chapter III Investment Protection

Section 21 The State shall not expropriate investments made by foreign investors.

Government takings of investments made by foreign investors done lawfully or for the public interest shall be done in a non-discriminatory manner and in accordance with applicable legal procedures. The foreign investor shall be entitled to prompt compensation equal to the fair market value of the investment taken.

Foreign investors who dispute a takings may request administrative reconsideration or file an administrative lawsuit pursuant to law.

Section 22 Capital contributions, profits, capital gains, proceeds from the disposal of assets, and intellectual property license fees obtained by foreign investors in China, as well as any indemnification or liquidation income obtained in accordance with applicable law, may be freely transferred or remitted in CNY or other foreign currencies, and no agency or individual shall restrict the currency, amount, or frequency of such transfers.

Salaries and other legally earned income paid to foreign employees of a foreign owned entity, as well as employees from Hong Kong, Macao and Taiwan, may be freely transferred.

Section 23 The State will increase penalties for intellectual property infringement, improve law enforcement of intellectual property rights, develop a coordinated protection system for intellectual property rights, optimize the alternative dispute resolution for intellectual property right disputes, protect the intellectual property rights of foreign investors and their entities equally.

Standards that affect patents owned by foreign investors and their entities shall be established in accordance with the applicable rules for standards involving patents.

Section 24 Administrative agencies (including organizations authorized to manage public affairs under law) and their employees shall not require nor cause foreign investors or foreign owned business entities to transfer their technology through administrative means, such as through administrative licensing, inspections, penalties, or coercion.

Section 25 Administrative agencies shall only require foreign investors or foreign owned entities to provide materials or information containing trade secrets when doing so is necessary to perform their lawful duties, and any such information shall only be used to the extent necessary to fulfill such duties. Only employees involved in such duties shall have access to the materials or information provided, and any such access shall be limited to the extent necessary to perform their duties.

Administrative agencies shall create and improve internal management systems and take any action necessary to protect the trade secrets of any foreign investor or foreign owned entity learned during the course of their work. Any trade secrets contained in information shared with other agencies under applicable law shall be kept confidential, and steps shall be taken to prevent the unauthorized disclosure of such information.

Section 26 Foreign investment regulatory documents issued by the government and appropriate agencies shall be subject to legal reviews.

If foreign investors or foreign owned entities have reason to believe that the regulatory documents used as the basis of an administrative decision taken by the State Council, local government, or their component agencies are unlawful, they may request a review of such regulatory documents when seeking administrative reconsideration or filing an administrative lawsuit.

Section 27 The commitment referred to in Article 25 of the Foreign Investment Act refers to the written commitment made by local governments at all levels and their agencies on supporting policies, preferential treatment, and incentives available to foreign investors and foreign owned business entities investing in their jurisdiction. The commitment shall comply with applicable law.

Section 28 Local governments at all levels and their component agencies shall fulfill their commitments to foreign investors and their entities, and will enter into agreements pursuant to law. The termination or breach of such agreements on the grounds of adjustment of administrative jurisdictions, changes in government, agency or functional adjustments, or replacement of the responsible person shall not be permitted. Any amendments to commitments or agreements due to national or public interest shall be made in accordance with statutory authority and the applicable procedures, and foreign investors and their entities shall be promptly and reasonably compensated for any losses suffered as a result of such amendments.

Section 29 Local governments at or above the county level and their agencies shall create and optimize a foreign owned entity complaint mechanism following the principles of transparency, efficiency, and convenience to promptly resolve any complaints filed by foreign owned business entities and improve supporting policies.

The jurisdictional commerce agency and other agencies under the State Council shall implement an inter-agency committee to resolve complaints filed by foreign owned entities at the central government level, and to provide guidance and oversight for local foreign owned entity complaint resolution efforts. Local governments at or above the county level shall designate agencies or organizations responsible for receiving complaints filed by local foreign owned business entities or their investors.

The jurisdictional commerce agency under the State Council and other agencies designated by such local governments shall improve complaint resolution rules, procedures, and time limits. These complaint resolution rules, procedures, and time limits shall be publicly announced.

Section 30 Foreign owned entities or investors believing that the actions of an administrative agency or its employees infringe upon its legal rights may request for resolution via the foreign owned business entity complaint mechanism.  The responsible agencies may request further information from the administrative agencies and their employees and such agencies and employees must cooperate with these requests. The results of such requests shall be promptly sent to the requester in writing.

Requests filed by foreign owned entities or their investors in accordance with the above shall not affect their right to seek administrative reconsideration or file an administrative lawsuit.

Section 31 No agency or individual may suppress or retaliate against foreign owned business entities or investors filing complaints or seeking resolutions through the complaint mechanism.

In addition to the established complaint mechanism, business entities that have foreign investors or foreign investors may also file complaints with the appropriate government agencies through other lawful means.

Section 32 Foreign owned business entities may set up chambers of commerce and industry associations in accordance with the law. Unless otherwise provided by law, foreign owned entities shall be entitled to decide whether to participate in or withdraw from such chambers of commerce and industry associations, and no organization or individual may interfere in their decision.

Chambers of commerce and associations shall improve industry self-regulation, promptly draw attention to industry issues, and provide members with guidance on consultancy, advertising and training, market development, commercial exchanges, rights protection, and dispute resolution in accordance with applicable law.

The central government shall provide its support to chambers of commerce and industry associations when conducting activities in accordance with applicable law and their Chamber or Association.

Chapter IV Investment Administration

Section 33 Foreign investors may not invest in sectors where the Foreign Investment Access Exception List prohibits foreign investment. Foreign investors investing in industries governed by the Exception List must comply with requirements on equity and executive managers provided in the Exception List.

Section 34 The jurisdictional agency shall not approve, issue licenses for, or register any investments by foreign investors or their entities that do not meet Exception List criteria, and shall not approve any fixed asset investment projects.

Agencies appropriate for administrating foreign investments shall improve oversight and inspection of investments prohibited or restricted by the Exception List, and investments made by foreign investors in industries prohibited or restricted by the Exception List or in violation of other administrative procedures provided in the Exception List shall be resolved in accordance with Section 36 of the Foreign Investment Act.

Section 35 Unless otherwise provided by law, the jurisdictional agency responsible for approving foreign investment in industries requiring approval shall review and approve such investments following the same procedures used for domestic investors and shall not impose discriminatory requirements for licenses, application materials, approval, or approval time limits.

The jurisdictional agencies responsible for issuing licenses shall explore various means to optimize review and approval services and efficiency. Notices and commitments for license applications meeting applicable conditions and requirements shall be processed in accordance with applicable rules.

Section 36 Foreign investment approval and filing shall be conducted in accordance with applicable national regulations.

Section 37 Registrations for foreign investment entity filing shall be processed by the market regulatory agency under the State Council or the market regulatory agency under the local government authorized by the State Council pursuant to law. The jurisdictional regulatory agency under the State Council shall be responsible for publishing a list of authorized market regulatory agencies.

Registered capital for foreign owned entities may be presented in RMB or other freely convertible foreign currencies.

Section 38 Foreign investors must report their investment information to the jurisdictional commerce agency via the National Business Entity Filing System and the National Business Credit Lookup System. The jurisdictional commerce agency and market regulatory agency under the State Council are required to properly integrate the business entity filing systems and provide guidance to foreign investors and entities reporting their investments.

Section 39 The content, extent, frequency, and specific procedures for foreign investment information reporting shall be determined and published by the jurisdictional commerce and market regulatory agencies under the State Council and other appropriate agencies following the principles of necessity, efficiency, and convenience. The jurisdictional commerce agency and other interested agencies shall improve information sharing and shall not require foreign investors or their entities to re-submit any investment information obtainable through inter-agency information sharing.

Investment information reported by foreign investors and their entities must be genuine, accurate, and complete.

Section 40 A national foreign investment security review process shall be established to conduct security reviews on any foreign investments that affect or may affect national security.

Chapter V Liability

Section 41 The government, appropriate agencies, and their employees shall assume liability under the following circumstances:

(1) The creation or implementation of policies that do not treat foreign owned and domestic business entities equally under law;

(2) Foreign owned business entities are unlawfully restricted or prohibited from equal participation in establishing industry standards, or are subjected to technical requirements higher than those provided by national mandatory standards;

(3) Fund transfers by foreign investors are unlawfully restricted;

(4) The failure to fulfill policy commitments and perform agreements lawfully executed with foreign investors and foreign owned entities, policy commitments that exceed statutory authority, or policy commitments made in violation of applicable law.

Section 42 Government purchasers or procurement agencies shall assume liability under the Government Procurement Act and its administrative regulations if foreign owned entities are subjected to disparate or discriminatory treatment, and any such treatment that affects or potentially affects bid or transaction results shall be resolved in accordance with the Government Procurement Act and its administrative regulations.

Government procurement regulatory agency supervisors and other employees directly involved in the resolution of complaints filed by foreign investors shall be held liable pursuant to applicable law if such complaints are not resolved within the specified time limit.

Section 43 Administrative agency executives and other accountable employees who require or cause foreign investors or foreign owned entities to transfer their technology through administrative means or coercion shall be penalized pursuant to law.

Chapter VI  Miscellaneous

Section 44 Foreign owned business entities  formed under the Law of the People’s Republic of China on China-Foreign Joint Venture Entities, Law of the People’s Republic of China on Wholly Foreign-Owned Entities, Law of the People’s Republic of China on China-Foreign Collaborative Joint Ventures prior to the enactment of the Foreign Investment Act (hereinafter referred to as “existing entities”) may either change their entity or organizational form and register the change in accordance with the Company Law of  People’s Republic of China and Partnership Business Law of People’s Republic of China or maintain their current form for up to five years after the Foreign Investment Act comes into effect.

Effective January 1, 2025, the market regulatory agency shall refuse registration applications from existing entities that fail to change their entity or organizational form and lawfully register such change. The agency shall also announce that it will now decline any other registration matters for such entities.

Section 45 Matters related to the registration of changes in entity or organizational forms for existing entities shall be regulated and announced by the market regulatory agency under the State Council. The market regulatory agency under the State Council shall optimize guidance for registering changes, and other market regulatory agencies involved in this process shall improve different aspects of their services to better serve entities filing changes.

Section 46 The existing entities that have changed their entity or organizational form in accordance with the law may continue to perform the equity, equity assignment, revenue sharing, and asset distribution methods agreed upon in the original joint venture or partnership agreements signed by the parties to the joint venture or partnership.

Section 47 The Foreign Investment Act and these Administrative Regulations shall govern mainland China investments by foreign investors.

Section 48 Unless otherwise provided by law or administrative regulations, investors from the Hong Kong or Macao Special Administrative Regions investing in mainland China shall comply with the Foreign Investment Act and these Regulations.

Taiwanese investors investing in mainland China shall comply with Law of the People’s Republic of China on the Protection of Taiwan Compatriot Investments (hereinafter referred to as the “Taiwan Compatriot Investment Protection Act”) and its administrative rules. Any matters not covered in the Taiwan Compatriot Investment Protection Act and its administrative rules shall be governed by the Foreign Investment Act and these Regulations.

Unless otherwise provided by law or administrative regulations, overseas Chinese citizens investing in mainland China are subject to the Foreign Investment Act and these Regulations.

Section 49 These Regulations shall take effect on January 1, 2020. The Administrative Regulations of the Law of the People’s Republic of China on China-foreign Equity Joint Ventures, Provisional Regulations on China-Foreign Joint Venture Entity Terms, PRC Administrative Rules on Foreign Investment Entities, and PRC Administrative Rules for China-Foreign Collaborative Entities shall be repealed on the same day.

The Foreign Investment Act and these Regulations shall control should there be any inconsistency between foreign investment rules made before January 1, 2020 and the Foreign Investment Act and these Regulations.