China's top legislature Tuesday passed draft amendments to two laws on foreign-funded firms in a move to make the country's laws consistent with principles of the market economy, rules of the World Trade Organization (WTO), and the commitments China has made during its negotiation for a WTO membership.
The draft amendments, passed at the 18th session of the Standing Committee of the National People's Congress (NPC) that closed Tuesday, involve the Law on Foreign-Capital Enterprises and the Law on Chinese-Foreign Contractual Joint Ventures.
According to the amendments, articles requiring foreign-funded enterprises to keep balance of their foreign exchanges on their own will be deleted.
Also abolished are stipulations requiring foreign-funded enterprises to give priority to Chinese-made raw materials for their production, and report their production plans to government departments concerned.
The amendments to the Law on Chinese-Foreign Equity Joint Ventures, formulated in 1979, will be submitted to next year's Fourth Plenary Session of the Ninth NPC for approval, as it is stipulated that the right to revise the law belongs to the NPC plenum.
Wang Weicheng, chairman of the NPC's Law Committee, said that this stipulation, which was made in the early years when China began to open its door to the outside world, was intended to ensure the stability of the country's investment environment.
Chen Guangyi, chairman of the NPC's Financial and Economic Committee, said draft amendments to the laws are part of the efforts China has made in the legal realm to prepare itself for the WTO entry.
"It also indicates that China is serious about carrying out the commitment it has made on its WTO accession," said Chen.
Foreign companies in China reacted positively to this legislative move that executives say they have been "awaiting for long."
"The revisions are evident of China's improvement in its market mechanism, and we would express our welcome to them," said Steve Chan, president of Coca-Cola (China) Co., Ltd.
"The Coca-Cola (China) Co., Ltd. will, as always, cooperate with related government departments and business partners to contribute to the development of the Chinese economy and its beverage industry," he said.
Domestic enterprises also said that they can handle these drastic changes that will benefit their foreign competitors.
"Even with such protective measures as local purchase of raw materials, foreign clothiers in China still have to import a large quantity of clothes due to the poor quality of Chinese materials," said Liu Heng, a well-known textile machinery engineer in China.
"But after years of efforts, Chinese weavers have made tremendous breakthroughs in improving the quality of their products, which are now very competitive," Liu said.
"Even the garment industry that insiders say would be hardest hit will be able to survive the revisions, and there will be no problem for other industries," he added.
Guo Shoukang, professor of the People's University of China, said that to facilitate its entry into WTO, China needs to have a thorough checkup of its existing laws and improve its legal system, and the revision work will be heavy.
"China should also make full use of its rights entitled by the WTO rules to formulate related laws and measures to safeguard its national interests and economic security, including those on anti-dumping, anti-monopoly, and anti-subsidies," the professor said.