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China's new foreign investment law cannot suffice for US trade agreements

After increased frustration by foreign companies about their ability to compete fairly with Chinese companies, the US and China became involved in trade tensions last year.

During US President Donald Trump, the rhetoric of saliva initially focused on US trade deficits with China. This resulted in the application of $ 250 billion in customs duties on imported goods from China, which Beijing counteracted US $ 110 billion in customs duties. In recent months, negotiations between the two sides have increasingly focused on intellectual property protection issues and the demand for technology transfer.

A little detail on the progress of the talks has been made public. On Friday, the Chinese state media said that the two trade delegates' leaders held a phone call in Beijing in the morning and made "substantial progress".

A few hours later, the symbolic collection of delegates approved the new foreign investment law. It took about three months from the NPC Standing Committee to start looking for views on its first draft.

"It's rushing through this," said Lester Ross, chairman of the US Chamber of Commerce's political committee in a telephone conversation with CNBC on Thursday. "It does not provide enough time for public comment from AmCham (and foreign companies). The law is fairly generic."

Ross also noted the draft gave China the right to retaliate against a particular country to restrict Chinese companies there. "The law offers a broader retaliation," says Ross, who is also a partner in the law firm Wilmer Cutler Pickering Hale and Dorr.

Such a clause essentially reinforces the unequal approach that foreign and Chinese companies have access to each other & # 39; countries. US companies have complained that they have less access in China than Chinese companies have in America.

But the Chinese government is clearly trying to show that it has interests for foreigners in mind. At the last minute, Beijing has even added a new language that provides additional protection for the commercial and commercial secrets of foreign companies, according to a final draft reviewed by the US-China Business Council.

"The addition of languages ​​that impose criminal penalties for sharing sensitive foreign business information assumes a much harder deterrent to counterfeiting and (intellectual property) theft and will offer new ways of enforcing (intellectual property) protection," says Jake Parker. vice president of China business at the US-China Business Council. A statement.

He noted that the Council is "satisfied" with the new language. He warned that "enforcement will be the most important metric for evaluating success, but business has been collectively advocating for several years for the Chinese government to impose criminal sanctions on (intellectual property) infringement, we must recognize the positive development for this purpose . "

The law will be implemented on January 1

, 2020. It is expected to abolish three existing regulations on limited liability companies, wholly foreign-owned companies and contractual associations, according to an English translation of the draft China law Translate.

In addition to foreign companies already seeing opportunities to take advantage of the world's second largest economy, the law gives them more incentives to enter China, Ross says: "It goes in a good direction. It doesn't" go almost far enough . "

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