This study describes and analyses the recently adopted foreign investment law (the Law) of China. First, this paper presents reasons for the adoption of the Law. For example, we focus on the trade war between the US and China, which has greatly affected the adoption of the Law. The political background that influenced the adoption of the law is revealed. Of note, legal techniques used by the Chinese legislators in the Law are evaluated. For example, a list system for investment sectors is used, which divides all industries into categories with a special regime. This system divides all industries into four categories: (1) encouraged, (2) permitted, (3) restricted, and (4) prohibited. In conclusion, this study emphasizes that changes achieved by the Law are not revolutionary. Some of the consequences that the adoption of the law entails is analyzed. Thus, the Law represents a gradual evolution in how foreign investors access the Chinese economy.

The Foreign Investment Law of the People’s Republic of China has attracted great attention worldwide since its adoption on March 15, 2019, and will come into force on January 1, 2020. This law can be regarded as the most important law of China in the field of foreign investment since China’s accession to the World Trade Organization. The legislation process of the foreign investment law of the People’s Republic of China has expressed the strong will of the Chinese legislature in amending and perfecting the legal system. The implementation of this law will positively impact the future investment environment of China. This article analyses the background and evolution of the legislation procedure, the highlights and features of the law compared with earlier related laws in the field of foreign investment of China, and the impact and insufficiency of the law, together with the issues following the implementation of the law.

Three foreign investment laws of China were enacted when she was mainly a capitalimporting state. The main purpose of these laws was to boost the Chinese economy with the capital, technology and management of foreign investors. Many preferential treatments, rather than national treatment, were given to foreign investment especially before the country joined the WTO. Following the reform of market economy, fair and equal treatment to foreign investors are replacing the preferential treatments. A new draft of Foreign Investment Law was released in the spring of 2015 to reform the governance of foreign investment by granting national treatment to foreign investors in both admission and operation. The restrictions to foreign investment will be subject to the categories of special administrative measures, which are composed of forbidden and restrictive categories. This is going to be China’s biggest reform on the legal system of foreign investment since 1980s.