As most of us are aware by now, March 2019 was the annual meeting of China’s congress.While the average joe simply notices that their VPN stops working and periodic news pieces come out on the party’s discussions, this year’s meeting was far more meaningful for innovation, technology, and startups.
A key priority of this year’s meeting was a new foreign investment policy that was written to address some of the country’s most crippling issues as they embrace the new strategy of an innovation-led economy.
While the issues around foreign investment, intellectual property rights attached to it, and policy transparency have been on the table for years, the policy this year has now been fast-tracked for full implementation by January 1st, 2020.
Keep reading this quick five-minute piece below to see all the details, downfalls, and meaning of the new foreign investment law and how it will affect you in the coming years.
Above all else, the new foreign investment policy is a direct response to US and international concern around intellectual property and copyright infringement in China.
Article 22 of 41 of the new policy takes a clear stance as a policy of commitment on behalf of Chinese officials to uphold, enforce, and prioritize the security of any and all intellectual property from foreign firms and innovators. Furthermore, the policy is also endorsing that foreign-invested companies and institutions will be treated and seen as equal to their local counterparts.
While the laws in mention are not exactly new, the initiative of taking a tougher and serious stance on copyright and IP law is more than likely to trickle down into concrete policies, laws, and enforcement in local provinces, cities, and districts.
During the meeting of the national congress, Premier Li Keqiang also offered more insight into the policy, stating that new sectors and verticals previously restricted will be opened up to foreign investment.
While the premier didn’t go into the specifics of which industries will see the first wave of relaxed restrictions, it’s still a meaningful statement, especially for foreign investors, innovators, and entrepreneurs. Although China’s market has been on the map of foreign business professionals for some time now, the amount of red-tape has always been a key hindrance and cause for concern amongst more integrated foreign involvement in the market.
With this new policy taking effect in Beijing and being pushed out nationwide as soon as next year, we expect to see more and more government ecosystem support in particular industries of specialization. This support will push foreign technology, innovation, and funds into key focus industries such as 5G, electric & automated vehicles, and many others.
The most important aspect of the new law, in our opinion, is the stage it sets for growth in sectors around foreign technology and innovation. While big-name publications like Forbes, the WSJ, and several others have all claimed the same thing — that this new foreign investment law will have little impact on the actual operation of foreign entities in China — we believe it’s the intention that counts.
The new foreign investment policy goes in line with a long string of Beijing policies that then trickle down into actual real life change. While critiques of the policy being opaque and most likely a simple tool in trade negotiations with the US, we believe the sentiment of the policy is far more real.
As provincial and district leaders throughout China’s high-tech zones and second-tier cities compete for Beijing’s innovation-based approval, it’s likely we’ll see some real changes. These will be in line with the policy’s main priorities of eliminating IP concern, developing transparent and seamless processes, and otherwise supporting foreign investment and innovation in China.