Chinese regulators are drafting a new foreign investment law that would close a loophole used by some of the top global technology, media and telecommunications companies to operate in the country, forcing them to find new ways to reach one of the world’s most sought after consumer markets.
Lawyers largely view the Draft Foreign Investment Law as beneficial to investors, not least because it removes a significant amount of red tape for investors seeking entry to China. For one, foreign companies would no longer require approval on a case-by-case basis from the Ministry of Commerce if they operate in any of a large number of approved sectors. But the proposed changes also take aim at foreign companies using so-called variable interest entities, or VIEs, to sidestep restrictions on investment in certain sectors like TMT.
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