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Voice of America: China Foreign Investment Law Raises Concern

January 28, 2019

In an effort to ease trade tensions with the Trump Administration, China is moving quickly to advance a draft version of its first Foreign Investment Law this week. Critics of the draft note that it is being “rushed through” China’s legislature and that many of its clauses include vague wording.

O’Melveny partner Walker Wallace believes that article 39 of the draft is problematic because it only gives foreign companies a five-year period to reorganize their existing corporate structure. “Putting the five-year term limit basically puts the gun to the heads of the joint venture parties and says you have five years to try and reopen…a deal that was closely negotiated before where people made trade-offs one way or another. And that opens up the possibility for all kinds of mischief,” Wallace says. Additionally, Wallace is encouraging China to level the playing field for foreign businesses by allowing them to establish domestic subsidiaries like local competitors.

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