Rajah & Tann Regional Round-Up
your snapshot of key legal developments in Asia
Issue 4 - Oct/Nov/Dec 2019
 

Significant Developments in China's Treatment of Foreign Investment – Implementing Regulation of Foreign Investment Law Comes into Effect on 1 January 2020

On 1 January 2020, the Implementing Regulation on the Foreign Investment Law of the People's Republic of China ("Implementing Regulation"), which was promulgated by the State Council of the People's Republic of China on 26 December 2019, came into effect. This follows the promulgation of the Foreign Investment Law of the People's Republic of China ("PRC Foreign Investment Law") on 15 March 2020 (which has come into effect since 1 January 2020). According to Premier Li Keqiang, "the Implementing Regulation aims to further strengthen the market-oriented business environment governed by a sound legal framework, and to reassure foreign investors and businesses regarding fair competition."


The three fundamental themes in the Implementing Regulation are: Investment Promotion, Investment Protection, and Investment Administration. Many of the common concerns long expressed by foreign investors in China are addressed within the provisions of the Implementing Regulation, such as the enforceability of incentive policies by government, the registration structure and procedure of foreign invested companies, IP protection, forced technology transfers, trade secrets and the transitional period for the existing foreign-invested companies.


It is also notable that there are still existing regulations, policies and rules issued by relevant authorities regarding foreign investment in China in the past years, which may not be fully consistent with the PRC Foreign Investment Law and the Implementing Regulation. Such regulations, policies and rules are also expected to be cleaned up and/or amended in accordance with the PRC Foreign Invested Law and the Implementing Regulation. Although the Implementation Regulation has made it clear that the PRC Foreign Investment Law and the Implemental Regulation prevail in the event of any inconsistency between the previous regulations, policies and rules and the PRC Foreign Investment Law and its Implementation Regulation, in practice there may be still uncertainties if the previous regulations conflict with the new law.


China New Cryptography Law Comes into Force on 1 January 2020

On 1 January 2020, the Cryptography Law of People's Republic of China (中华人民共和国密码法) ("Cryptography Law") came into force.


The Cryptography Law was enacted for the purposes of:


  1. standardising the application and management of cryptography; 

  2. safeguarding network and information security, national security as well as social public interests; and

  3. protecting the legitimate rights and interests of citizens, legal persons and other organisations.

Salient objectives of the Cryptography Law include:


  1. emphasising the grooming and rewarding of cryptography talents, and the express positioning of cryptography as an integral part of local-level development plans;

  2. reinforcing China's intention to develop and establish standardisation, certification, accreditation and supervisory frameworks, thereby positioning and entrenching itself as a standard-setting body in the field of commercial cryptography; and

  3. according protection to proprietary technology and information, including imposing express prohibitions on forced technology transfers and disclosure of source codes.

The Cryptography Law is a strong policy statement that China intends to adopt greater institutional efforts to further strengthen and promote the development and application of blockchain technology, and to entrench itself as a leading global player and standard-setter.


An Upgrade in Free Trade – China-Singapore Free Trade Agreement Upgrade Protocol Comes into Force

On 16 October 2019, the China-Singapore Free Trade Agreement ("CSFTA") Upgrade Protocol ("Upgrade Protocol") came into force. The articles relating to the Rules of Origin took effect later on 1 January 2020. The Upgrade Protocol seeks to enhance the trade and investment linkages between the two countries.


The Upgrade Protocol enhances numerous areas of trade and investment between China and Singapore, including trade in goods and services, investment and customs. It also introduces new chapters on competition, environment and e-commerce.


The Upgrade Protocol introduces a number of enhancements across various areas of trade and investment, including the improved Rules of Origin. The improved Rules of Origin seek to enhance market access for goods. One of the key improvements is that more petrochemical exports from Singapore will qualify for preferential treatment when imported into China. This took effect from 1 January 2020.


The CSFTA has had a greatly positive impact on trading relations between the two countries. Bilateral merchandise trade grew at 6.6% and investments grew at 11.9% per year on average. China remains Singapore's largest trading partner, while Singapore has been China's largest foreign investor since 2013. Further, in 2018, total bilateral trade between Singapore and China reached S$135 billion.


For more information, please click here to read our client update.




Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice.

 

Rajah & Tann Singapore LLP
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Chia Kim Huat
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Chia Lee Fong
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Linda Qiao
Senior International Counsel
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F 86 21 6120 8820
linda.qiao@rajahtann.com

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