Li Lianqi Legal system of the enterprises with foreign capital in the People’s Republic of China and the tendencies of its development

Abstract: The basis of the legal system for working with foreign capital in the People’s Republic of China is formed by “commercial organizations” and its nucleus is formed by the Laws “On share joint ventures of Chinese and foreign capital”, “On enterprises involving foreign capital”, “On Chinese and foreign jointly managed enterprises”, etc., regarding enterprises involving foreign capital. This legal system combines corporate law, anti- monopoly law and elements of other branches of law, brining into unity all of the elements of legal systems in order to regulate access to direct foreign investment, their management, administration, etc. From the legal viewpoint the norms of corporate law are recognized as general legal provisions, and the norms of Law “On enterprises involving foreign capital” are recognized as lex specialis. If one is to follow the principle of legal practice, providing that lex specialis norms dominate over general norms, any legal disputes may be resolved. The People’s Republic of China uses the method of attracting direct foreign investments in addition to investments for the formation of new enterprises. Also, the People’s Republic of China allows foreign entrepreneurs to use the method of mergers and acquisitions in order to form new enterprises, however, this sphere is also subject to anti-monopoly legislation. Additionally, the People’s Republic of China provided an optimum benefit policy for the foreign investors via the division (unification) method. Currently the problems of legal system regarding enterprises involving foreign capital in the People’s Republic of China concern its “bulky” large-scale character, doubling of legislative article and complicated legal system, involving domestic and foreign capital. That is why the People’s Republic of China has started the process of further improvement of legislation on the companies involving foreign investments in order to ease the “highest national regime” and “lowest national regime” of foreign enterprises, the possibility to terminate some laws regarding enterprises with foreign investments, and development of a unified Law “On foreign investments” and formation of a good investment climate.

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