In late May 2016, nearly 5,000 people from over 40 different countries across the globe came together in Montreal, Canada, for the 5th C2 Montréal Conference. JT&N senior partner Guohua (Annie) Wu, was invited to speak on Chinese regulatory environment.
C2 Montréal has received accolades worldwide. Le Nouvel Observateur has called it the “Davos of Creativity,” The Economist lauded that it “challenges convention,” and the Harvard Business Review described the event as “the conference that’s trying to reinvent how we network.”
Among other things, C2 aims to bring together global trailblazers, business innovators, entrepreneurial icons, social game-changers, and a host of other engaging thought provocateurs at the top of their creative game. In addition to Ms. Wu, this year’s speakers included Canada's Governor General David Johnston, Nobel Peace Prize Laureate Professor Muhammad Yunus, Emmy Award-winning television program host Ms. Martha Stewart, and Airbnb’s Head of Global Hospitality & Strategy Chip Conley.
We are very pleased to publish a bilingual version of Ms. Wu's speech. The script of her speech is as follows:
Striding Toward a More Open and Innovative China – Key Legal Highlights
Good morning, my name is Annie Wu. It is a great honor and privilege to speak at C2 this year. It is my first time in Montreal, but I have worked for, or with, a number of Canadian companies in the past, including Bombardier Aviation as its lead counsel in setting up its first joint venture in China. I have always been fascinated about the city’s heritage, culture and great food, and am excited to finally have the opportunity to come and visit Montreal and experience it first-hand and, more meaningfully, to share my views today on China’s dynamic regulatory landscape.
C2 is about creativity. But law is about restrictions and boundaries. So as a lawyer, why am I on the stage here today? I believe that law plays a critical role in guiding the direction of a society. If it caters to innovation, then innovation and creativity will flourish in that society. And in my view, that is the general direction of China’s regulatory regime. I hope to successfully demonstrate my point today. The key words of my remarks today are: “rapid change,” “draft foreign investment law,” “negative lists,” “free trade zones,” and the “3 Ps.”
One thing to note is that the pace of China’s regulatory change is phenomenal. For example, in 2015 alone, 42 pieces of legislation were promulgated or amended by the Standing Committee of the National People's Congress and, in 2016, 39 pieces of legislation will be considered by it, including the new draft cybersecurity law. In my view, the general direction of legislation reflects China’s determination to push toward a more open and innovative society, as older regulations are streamlined, modernized and improved.
The following are cases in point.
Let’s start with the “Draft Foreign Investment Law,” which was issued in January 2015 for comments. It intends to overhaul the old legal framework governing foreign investment by creating a more transparent, efficient and coordinated one. For example, until now, foreign direct investment in China has been channeled into three regulatory tracks comprised of WFOEs (Wholly Foreign Owned Enterprises), EJVs (Equity Joint Ventures) and CJVs (Cooperative Joint Ventures). But, on the horizon, we can see that foreign direct investment will be regulated under one unified system.
Next we have “Negative Lists.” By way of background, the current practice is that investment is reviewed and approved on a case-by-case basis. Under the “negative lists” regime, all investment activities are permitted unless they are prohibited or restricted under the lists. There are two types of negative lists in China. One governs market access, and will apply to all market participants, including multinationals (the General List). The second type applies solely to foreign investors (the Foreign Investment List). The General List and Foreign Investment List are intended to work together to improve administrative efficiency and transparency and level the playing field for all market participants, both foreign and domestic. The Foreign Investment List has already been utilized on a trial basis in the free trade zones, and it is expected that the General List will be implemented nationwide by the end of 2018.
Finally, there are the “Free Trade Zones” in Shanghai, Tianjin, Guangdong, and Fujian. These free trade zones have been created as experimentation fields for economic and financial reforms. If a reform is successful in a Free Trade Zone, then it could be implemented nationwide. For example, for institutions wishing to tap into Chinese capital for outbound investment, a few authorized channels have been made available in some free trade zones through which RMB may be converted into a foreign currency with more relaxed approval requirements.
Some may argue that multinational companies are increasingly sidelined in China, but I would argue that the reality is far more complex. It is true that, in some respects, China is moving cautiously, but in order to continue to maintain a vibrant and sustainable economy, China now, more than ever, needs all of the help it can get from the international community. By the same token, multinational companies and entrepreneurs must adapt to a more sophisticated and selective China by striving to be more “proactive, pragmatic, and persistent.”
It may seem that it never comes easy, but with the law playing a critical role in guiding its direction, China is purposefully striding towards a more open and innovative economy and society.