On March 15, the National People’s Congress (NPC) will vote on a new Foreign Investment Law (FIL). The Chinese government says it will level the playing field for foreign investors. Wang Chen, Vice Chairman of the NPC’s Standing Committee, said 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”. The United States and the European Union have repeatedly complained about poor market access, unfair competition, forced technology transfer and weak intellectual property protection. The legislation would replace three other laws governing foreign investment – the Chinese-Foreign Equity Joint Venture Law, the Wholly Foreign-Owned Enterprises Law and the Chinese-Foreign Contractual Joint Ventures Law.

But some in the foreign business community in China say the law lacks substance and is being rushed through to reach a deal with U.S. President Trump in the trade war. Article 22 explicitly prohibits administrative agencies and their staff from using administrative means to force the transfer of technology. “Many of the current issues with forced technology transfers arise from the complex interplay between different regulations rather than from express legal obligations, and it is questionable how effective the high-level prohibition will be in view of those underlying regulations,” Gordon Milner, Partner at law firm Morrison & Foerster said. “We are concerned that the drafting of the Foreign Investment Law (FIL) is being squeezed between the normal legislative process and the negotiation table with the U.S., in part to address the trade conflict,” said Mats Harborn, President of the European Union Chamber of Commerce in China, who called for a more considered and consultative drafting of the law.

“It has some good language in it, but it’s a lot shorter than the original drafts,” said Timothy Stratford, Chairman of the American Chamber of Commerce (AmCham) in China. “It is shorter because a lot of the implementing detail has been chopped out.” “While it may improve intellectual property rights protection, there’s little clarity on how the government will implement many of its provisions. A bigger issue is why there still needs to be a separate regime for foreign investors versus domestic players,” said Ker Gibbs, President of AmCham in Shanghai. There is a common view that the law is only as good as its enforcement – the details of which are scant in the draft document.

The NPC continued its deliberations last week following delivery of the report by Premier Li Keqiang at the opening session on March 5. The delegates discussed the government budget report and listened to reports on the work of the NPC Standing Committee, the Supreme People’s Court and the Supreme People’s Procuratorate. State Councilor and Foreign Minister Wang Yi held his yearly press conference.

Reading of the budget report revealed that the budget for science and technology would expand 13.4% to CNY354.31 billion this year, despite slower economic growth. Premier Li Keqiang said China would increase support for basic research and application-oriented research, stepping up original innovation and working harder to achieve breakthroughs in core technologies in key fields.

Although not mentioning the “Made in China 2025” program, Li said China would expand “smart plus” to transform and upgrade its manufacturing industry. “Made in China 2025” has been a waste of taxpayers’ money, China’s former Finance Minister Lou Jiwei has said. “Made in China 2025 has been a lot of talking but very little was done,” Lou, who is currently Chairman of the National Council for the Social Security Fund, said. “There was no need to talk about the year 2025 in the first place,” he said. “The government wants industries to be at the top notch by then, but those industries are not predictable and the government should not have thought it had the ability to predict what is not foreseeable. The resources should have been allocated by the market; the government should give the market a decisive role,” Lou said. Since the plan’s launch in 2015, the government has poured money into MIC2025 to try to turn a number of domestic industries – including artificial intelligence (AI), pharmaceuticals and electric vehicles – into global leaders by 2025.