As we know, legal environment plays an important role for investment environment, and is also a necessary factor of attracting potential foreign investors. In this case, it has become an essential indicator for improving investment environment in China. Since reform and opening up of China, a series of foreign investment law was published during 1980s to build a legal system of foreign investments. “Law of the people’s republic of China on foreign-owned enterprise”1 and “the law of foreign-owned enterprise implementation regulations”2are parts of them. As a mount of foreign-owned company established in China in last century and China joined in WTO in 2001,”Law of the people’s republic of China on foreign-owned enterprise”and its implementation regulations have been amended in 2000 and 2001 respectively to adapt to the new changes in economic circumstances. Thus a free and open legal environment for foreign enterprises has been improved initially. For example: the enterprise’s obligations of exporting3 and reporting the production plan4 were canceled, which was stipulated in the old foreign-owned enterprise law. Moreover article of “the priority to buying Chinese raw materials and fuel under the same conditions5” was removed either, in order to esteem business autonomy; articles contrary to the provisions of the stipulation of WTO were deleted as well, including “balancing own foreign exchange”6, “requirement for local materials” , “requirements for exporting implementation” etc.
Though the new foreign-owned enterprises law considered more about the new economic situation, there are still some incomplete aspects which restrict the foreign-owned enterprises to go further in China market. Meanwhile, several conflicts are arising between new “company law”, which was published in 2006, and foreign-owned enterprise law. Those problems all affect the development of foreign-owned enterprises in China. From this point of view, this article will analyze the drawbacks of foreign-owned enterprise law and the effect of them on China’s legal environment:
1) Implementing issues of foreign-owned enterprise law.
Firstly, the amendments for “foreign- owned enterprise law” and their implementing regulations in respect of procedure matters were not enough; therefore, the fact that to set up a foreign-owned company would experience eventually a very complex, long and inefficient process, has not been changed fundamentally. Under the current regulations, the basic formation process includes the following steps: (1) Submit the application to the government of county level or above the county level where the foreign-owned enterprise will be established, and deliver relevant documents. (2) Submit the application through the above government to the approval authority for approving the establishment. (3) Registration in the industrial and commercial bureau. (4) And other related registrations. The completed process not only links many departments, but also requests for submitting a variety of written materials. The whole process usually makes potential foreign investors too confused to continue the investment. Finally, the enthusiasm of foreign investors is weakened badly. Fortunately, all levels of government have stood on the front line of attracting investment, and taken various measures to improve the investment environment to promote investment practically. At the same time county, district, development areas have been authorized to approve the project directly through various forms. Above all, it is absolutely significant and possible to simplify the procedures of foreign-owned enterprise establishment.