Beijing yesterday released new implementation rules of the newly revised Sino-foreign joint-venture laws, which is the main legal framework for foreign-funded companies operating in China. In their fourth incarnation since 1983, the rules struck from the books a number of restrictions on such joint ventures. The original rules allowed foreign investment into some 20 major industries, including agriculture, manufacturing and tourism. The reference is noticeably absent from the latest version, a move which may foreshadow future changes to allow foreign participation in previously restricted areas, according to legal experts. However, the legal experts urged China to take bolder steps to create a level playing field for domestic and foreign-invested enterprises. 'These revisions in themselves aren't earth-shaking,' said David Pierce, a Shanghai-based partner with United States law firm O'Melveny & Myers. 'But they do follow through on the big commitments China has made to join the World Trade Organisation.' The rules, which expand on the Sino-foreign equity joint ventures law first drafted in 1979, were twice revised - in 1986 and 1987. Both were meant to bring the documents in line with China's bilateral pacts with the US and the European Union to join the WTO, in which Beijing pledged equal treatment of foreign-funded and domestic enterprises. However, Mr Pierce said that the document did not open up new fields for foreign investors. They remained bound by the foreign trade ministry's foreign investment catalogue, also believed to be under revision, which distinguishes sectors where foreign investment is encouraged, permitted, restricted or prohibited, said Andreas Lauffs, a partner of US law firm Baker & McKenzie. China historically deemed foreign-invested enterprises as a primary engine driving its export push and ballooning foreign currency reserves. The new rules also scrapped requirements for joint ventures to help expand the country's exports, to maintain their foreign currency balance of payments and give priority to domestic suppliers of equipment and raw materials. It removed shortages or import substitution as prerequisites for Sino-foreign joint ventures to sell their products in China. Mr Lauffs, however, dismissed the revisions as 'more of a cosmetic nature'. They 'would have been significant if they had clearly stated that . . . any joint venture may sell and distribute, in addition to self-manufactured products, also third-party products,' he said. The so-called trading rights issue was a sticking point in bilateral WTO accession talks with the US and EU.
