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Home > LAWREVS > WILJ > Vol. 34 > A Critical Examination of "Decoupling" Symposium Issue

 

Washington International Law Journal

Abstract

Abstract: In response to the U.S.’s calls for U.S.-China decoupling by repatriating U.S. business operations and eschewing new investments in China, China introduced the Foreign Investment Law (“FIL”) in 2020. The FIL marks a new era of foreign investment in China. It eliminates the requirement of prior government approval for all foreign-funded enterprises, including joint ventures consisting of U.S. companies and domestic Chinese state-owned enterprises. Many U.S. companies found the approval process under the previous legal regime to be time consuming, arduous, and oppressive. This process has now been replaced by a simple registration process under the FIL and the People’s Republic of China (“PRC”) Company Law. The FIL also responds to concerns regarding discrimination against the U.S. vis-à-vis China’s favorable treatment of its state-owned domestic enterprises and domestic companies by requiring equal and non-discriminatory treatment of foreign investors and foreign investments. Additionally, the FIL contains numerous provisions responding to U.S. concerns about technology transfer, a hot-button issue in U.S.-China economic relations. While China maintains a restrictive investment climate compared to the U.S., the FIL represents a significant improvement of the investment climate and signals China’s willingness to consider additional reforms. The FIL may create incentives for U.S. companies to ignore calls to decouple and continue to establish new business operations in China.

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