SARs considered in mainland investment law update

A new law on foreign investment, which will target investors from Hong Kong, Macau and Taiwan, is expected to be passed during the National People’s Congress.

According to Zhang Yesui, the spokesperson for the annual legislative session, the new bill – which covers the three regions – is expected to be discussed on Saturday.

“Hong Kong, Macau and Taiwan are part of China, and at the same time they are also separate customs territories. Therefore, investments from Hong Kong, Macau and Taiwan are unique in a way [given] that they are not foreign nor domestic investments,” said Zhang, according to a report issued by the South China Morning Post.

“In practice, we manage these investments [from Hong Kong, Macau and Taiwan] by referencing them as foreign investment. This will not change with the new legislation in place,” he said.

The draft bill has been out for consultation since December 2018, yet it does not specify whether it would be applicable to the three regions.

The legal status of investments from these regions was also not stated, thus investors expressed concerns that their businesses would be affected by the law.

In response to this Zhang said, “Going forward, this [new] system will continue to be improved along the way to provide a more open and easier business environment for investors from Hong Kong, Macau and Taiwan.”

The new legislation will replace capital laws including the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Contractual Joint Ventures and the Law on Foreign-Capital Enterprises. These laws came into effect in 1979, 1988 and 1990 respectively.

According to the report, the supplementary “rules for implementation” of the three laws state that investments from Hong Kong, Macau and Taiwan will “be dealt with by referencing this document”, suggesting that these regions would be classified under foreign investments.  LV