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Beijing reassures investors in Hong Kong, Macau and Taiwan over new foreign investment law

New law set to be passed this week at the National People’s Congress

  • Investments in mainland will still be considered “foreign”, with no effect on legal status

Beijing’s top official on Hong Kong affairs has reassured the city’s investors, as well as those from Macau and Taiwan, that they will be covered by China’s new foreign investment law set to be passed this week at the National People’s Congress (NPC).

The remarks by Zhang Xiaoming, director of the central government’s Hong Kong and Macau Affairs Office, were the first time a Beijing official overseeing the city’s affairs had confirmed that the new law would not change the legal status of investments from Hong Kong, Macau and Taiwan – specifically, that they would still be considered “foreign” investments.

Zhang said the details of the law would be clearly defined in official documents to be issued later.

The new law – partly to address concerns raised by Washington – bans mandatory technology transfers from foreign firms and encourages technological cooperation on a voluntary basis.

“The NPC has consulted relevant departments, the two governments of [Hong Kong and Macau] special administrative regions, and the views of various sectors in Hong Kong and Macau,” Zhang said.

“After repeated studies, we decided to specify two points in the rules for implementation: investors from Hong Kong, Macau and Taiwan could make reference to the foreign investment law, and for issues already addressed by other existing legal regulations, those regulations are to be followed.”

The “rules for implementation” are supplementary documents that the central government will issue after the new law was passed.

Zhang’s comments emerged from a closed-door meeting on Sunday of Guangdong province's delegation to the NPC. The details of the meeting were released on Monday. The new law was expected to be passed as the annual session of the NPC closes on Friday.

At the meeting, Zhang also said investors from Hong Kong and Macau had been given more favourable status than foreign investors under the Closer Economic Partnership Arrangement (CEPA) signed between mainland China and Hong Kong in 2003.

Hong Kong businesses have always been recognised as foreign investment, and CEPA gave preferential status over other foreigners.Jimmy Ng Wing-ka, lawmaker and representative of the Chinese Manufacturers’ Association of Hong Kong in the Legislative Council

But it would be difficult for the central government to draft new investment laws specifically for investors from Hong Kong, Macau and Taiwan as some suggested, he said, without elaborating.

Wang Chen, vice-chairman of the NPC’s Standing Committee, said last week that the legislation would “promote foreign investment, protect the lawful rights and interests of foreign investors in the new era”, and “foster a market environment in which domestic and foreign capital compete on a level playing field”.

China’s biggest trading partners, the United States and the European Union, have repeatedly complained about poor market access, unfair competition, forced technology transfer and weak intellectual property protection in the world’s second-biggest economy.

Zhang Yesui, an NPC spokesman and a former deputy foreign minister, said last week that the law would cover Hong Kong investments, but some local businessmen remained worried.

Many Hong Kong businessmen, including Peter Lam Kin-ngok, the incoming chairman of the Trade Development Council, had urged Beijing to spell out the details of the new foreign investment law.

Lawmaker Jimmy Ng Wing-ka, who represents the Chinese Manufacturers’ Association of Hong Kong in the Legislative Council, said Zhang’s remarks would alleviate concern over the new law.

“Hong Kong businesses have always been recognised as foreign investment, and CEPA gave preferential status over other foreigners. Now, with the confirmation from the official overseeing the city’s affairs, businesses should not worry about the new law anymore,” he said.

The new legislation will replace the “three foreign capital laws” – the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Contractual Joint Ventures and the Law on Foreign-Capital Enterprises – which into effect in 1979, 1988 and 1990, respectively.

Courtesy : South China Morning Post

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