(Yicai Global) Dec. 24 -- Legislation on foreign investment in China, which received its first iteration at the start of 2015 but was never enacted into law, switched into the fast lane this year, with insiders saying that they can sense a general trend towards facilitation and protection of foreign investment.

A new draft law on foreign investment was submitted to the National People's Congress Standing Committee for review yesterday. The draft was pushed faster than expected with changes made to the original, several insiders told Yicai Global.

The legislative guidance has changed from administration to facilitation and protection, Liang Guoyong, an official of Investment and Enterprise at the United Nations Conference on Trade and Development, said after comparing the old with the new version.

"Chapters three to five were Market Entry Administration, National Security Review, and Information Reporting in the initial version with detailed content and investment promotion and protection in the following chapters," Liang said. "The current version, however, starts with investment promotion and protection. According to the information disclosed so far, the latest version clearly responds to certain demands [of investors], who may find the draft inspiring if they read it."

Ren Qing, a partner of Beijing-based Global Law Office, submitted written comments after the release of the 2015 draft, and also participated in pre- and post-sessions. Compared with the original, the new version emphasizes the protection of intellectual property rights and states that local governments should abide by agreements with foreign companies while only making general rules on the security review of foreign investment, Ren said.

Fortified Protection

The new version also responds to the concerns of governments and firms in the US and Europe. With IPR protection reinforced, it specifically bans using administrative means to force technology transfers and the fair participation of foreign-invested firms in standardization, government procurement and state support, Ren said.

He believes that the NPC may complete its third deliberation of the draft by the end of next year. It is expected to be adopted at the NPC and the Chinese People's Political Consultative Conference in the spring of 2020.

Insiders believe that the series of legislation and measures to promote and protect foreign investment are included under the "institutional openness" proposed by the Central Economic Work Conference held from Dec. 19 to Dec. 21.

The current opening-up is focused on fair competition issues with foreign products, services and firms in China, rather than broader measures or market access, Tu Xinquan, president of the China Institute for WTO Studies of University of International Business and Economics, told Yicai Global.

The formulation of institutional openness is still being studied, but it is clear that China will work towards shortening the negative list next year, Tang Wenhong, director of the Foreign Investment Department of the Ministry of Commerce, said. China will also widen market access, remove access restrictions on foreign investment in areas other than the negative list, and set the same market access standard for both foreign and domestic investment.

"We know that reducing the negative list is good," Tang said. "We need to deepen and refine the large number of policies and regulations that come with the shortened list."

The commerce ministry will study the specific plan for establishing a new area of the Shanghai Pilot Free Trade Zone, put forward the policy and institutional system for building a free trade port in Hainan province in a step-by-step and phased manner, and accelerate the construction of free trade ports with Chinese characteristics, Tang added.