On 24 June 2020, the People's Republic of China released its 2020 nationwide negative list for foreign investment in China (other than the free-trade zones of China) and the 2020 negative list for foreign investment in free-trade zones of China ("2020 Nationwide Negative List" and "2020 FTZ Negative List", respectively, and collectively "2020 Negative Lists"), both of which will take effect on 23 July 2020. Compared with the 2019 versions of the respective negative lists, the number of sectors that are restricted or prohibited for foreign investment will be cut from 40 to 33 in the 2020 Nationwide Negative List and from 37 to 30 in the 2020 FTZ Negative List, with a view to further opening up the market access for foreign investment.
Notably, the foreign shareholding restrictions on securities, fund management, futures, and life insurance companies will be removed entirely, reinforcing the relevant open-up regulations previously issued by the China Securities Regulatory Commission and the China Banking and Insurance Regulatory Commission. The 2020 Negative Lists will further remove restrictions on foreign investment in the production of commercial vehicles and air traffic control, and allow foreign investors to take majority shares in joint ventures that engage in the building and operation of water supply and drainage networks in cities with a population of more than 500,000. Similar to the current applicable foreign investment rules in the free trade zones, the 2020 Nationwide Negative List will further remove the restrictions on foreign investment in the smelting and processing of radioactive minerals, and the production of nuclear fuel. It will also raise the foreign shareholding ratio in wheat breading and seed production to 66%.
Compared with the 2020 Nationwide Negative List, the 2020 FTZ Negative List will further allow academic vocational education institutions to be wholly owned by foreign-owned institutions. It must be noted that foreign investment in non-academic vocational training institutions has been freed up in the free-trade zones of China since 2015. The 2020 FTZ Negative List will also remove the restrictions for foreign investment in the application of steaming, frying, broiling, calcining and other processing techniques for prepared slices of traditional Chinese medicine and the production of products with confidential Chinese patent drug prescriptions.
On 28 May 2020, the National People's Congress of the People’s Republic of China ("PRC"), which is the top legislature of the PRC, passed the long-awaited PRC Civil Code ("Civil Code"). The Civil Code is the nation’s first civil code and the only existing legislation officially named a "code". The Civil Code will come into effect on 1 January 2021, and will replace, among other laws, the General Principles of the PRC Civil Law, the General Provisions of the PRC Civil Law, the PRC Marriage Law, the PRC Inheritance Law, the PRC Adoption Law, the PRC Security Law, the PRC Contract Law, the PRC Property Law and the PRC Tort Liability Law.
The Civil Code reforms the PRC civil law system to keep pace with rapid social and economic modernisation. It consists of seven chapters, including chapters on general rules, property rights, contracts, personality rights, marriage and family, inheritance, and tort. It not only codifies the existing laws on civil matters, but also revises some of the existing provisions and introduces new provisions on civil matters. One of the major breakthroughs that the new Civil Code has achieved is the devotion of one entire chapter (Chapter IV) to addressing and protecting personality rights such as personal information and personal privacy. Additionally, the Civil Code for the first time recognises the legal status of the right of habitation, through which houseowners will no longer be able to evict registered habitants or sell the relevant houses before the period of habitation expires. The Civil Code is expected to spell out the clearest boundaries between the Government’s powers and the citizens’ personal rights since the founding of the PRC in 1949.
Compared with the current PRC Property Law and the PRC Contract Law, the Civil Code introduces several major modifications with respect to Property Rights and Contracts which are found in Chapters II and III, respectively. Consequently, the Civil Code will also have significant impact on foreign-related transactions in or relating to the PRC, such as those that relate to the conclusion of a contract and the obligations of a guarantor (e.g. the default assumption of general guarantee in the event the parties do not stipulate the type of guarantee or the agreement is not clear).
