The Foreign Investment Enterprise Law of the People’s Republic of China aims to expand foreign economic cooperation in China, in order to not only promote the development of China’s national economy, but also to protect the lawful rights and interests of foreign-funded enterprises in the country; a two-way street on the bridge of co-operation between China and the international world at large.
Law of the People’s Republic of China on Foreign-Capital Enterprises; Benefits to the Chinese Business Marketplace
Promote Sustained and Rapid Economic Growth and Increase Fiscal Revenue
China has a relative shortage of production factors, such as capital and technology, resulting in Foreign Direct Investment (FDI) meeting a large capital demand for China’s economic construction. FDI not only increases China’s capital stock, but also indirectly promotes Chinese enterprises to expand the scale of investment, thus obviously increasing the capital scale of society and promoting the increase of China’s fiscal revenue.
Promote Industrial Structure Optimisation and Upgrade
According to the data, nearly 70 percent of foreign investment goes to secondary industries, close on 30 percent to tertiary industries and less than 2 percent to primary industries. In basic terms, FDI conforms to the objective requirements of the current adjustment of the industrial structure in China, thus promoting the development of secondary and tertiary industries (especially the manufacturing and real estate sectors) in China.
Improve the Technical Level of China’s Industry
FDI has directly or indirectly promoted the improvement of China’s technical level. Since reform and opening up, FDI has brought many advanced and applicable technologies to China and promoted the upgrading of both Chinese products and technology. Through joint ventures and cooperation with foreign investors, the technological level of many products in China has also been significantly improved. In an indirect sense, foreign invested enterprises urge Chinese firms to introduce advanced technology from abroad, or adopt advanced technology through independent innovation, not too mention the impact on employment such measures have brought to the economy.
Promote the establishment and improvement of China’s modern enterprise system
China’s absorption and utilisation of FDI, especially through investments in large multinational companies in the European Union, the United States and Japan, drawing on advanced management methods and systems, has promoted the establishment and improvement of a modern enterprise system in China, together with the restructuring of State-Owned Enterprises and the improvement of corporate governance structure in China.
The Law of the People’s Republic of China on foreign-capital enterprises can be considered a key bridge which has connected China with foreign investment and its impact may be seen across the domestic sphere. In the future, this law will also help China to manage and cooperate with foreign capital in its further opening up to the world.