China offers multiple opportunities for foreign investment. The 14th Five-Year Plan 2021 – 2025 (‘Five-year Plan), approved by the National People’s Congress on 11 March 2021, established a new economic model term – dual circulation.
Dual circulation is a two-fold plan to stimulate domestic growth and consumption by boosting domestic and foreign markets. It aims to increase internal demand for goods and attract high-value foreign investments, such as new technologies and advanced manufacturing. The Five-year plan increases market access and broadens opportunities for foreign investment in finance and business.
Foreign investors seeking to venture into China should note that the economic model based on low-priced goods and labour costs no longer exists. China’s economic and social advances have paved fundamental changes in the business environment. Now progress is based on high levels of productivity.
The Five-year Plan sets forth China’s objective to become a leading innovation country by 2035. Specifically, a national technological blueprint is outlined for the next five years. For European companies, particularly Italy, this articulated plan could be leveraged by companies with rich expertise and know-how. Overall, the Five-year Plan outlines multiple production and commercial opportunities for companies to seize and implement into reality.
The Horizons Corporate Advisory Roadshow
Horizons Corporate Advisory launches a China Roadshow to present these new prospects in China. In collaboration with various Italian Industrial Federations, the international legal, tax and strategic consulting group within Horizons Corporate Advisory will advise companies on internationalising in China. The Italian Industrial Federation include Piacenza, Romagna, Bergamo, Biella, Pordenone and Marche.
The Roadshow is led by Dr Lucia Myriam Netti, Regional Partner in Horizons Italia, Head of Consulting in EMEA, and Dr Pier-Domenico Peirone, Executive Director of Pathways (partner of Horizons Group).
The China Roadshow comprises two sessions. The first session highlights ‘Doing Business in China for the following three types of companies:
- Companies seeking to venture into China
- Companies with a presence in China but have not established any operation
- Companies with a representative office there, but no direct investments
The second session focuses on appropriate strategies to succeed in the Chinese market. Specifically, it will focus on contractual relationships and tools to govern and protect the business.
Below, we highlight five aspects of the China Roadshow for companies planning to invest or have invested in China.
Trademark protection is crucial for companies entering the China market. In the China Roadshow, our experts will cover key questions such as:
- How to register your trademark?
- How to protect it?
- How to ensure compliance is followed and penalties are mitigated?
- What are the tools to protect your business?
Dr. Peirone, who has advised Italian companies in various sectors in China, explains:
“In the field of intellectual property rights, China’s regulations and procedures often differ from western jurisdictions. In some cases, procedures are more binding than international regulations. Protecting your trademark in China establishes a solid foundation for investment. Therefore, to enter the Chinese market correctly, trademark protection shall be a priority. Without this fundamental, any other subsequent operation will be compromised.”
After the start-up phase, the companies may focus on business development. However, companies shall avoid possible legal stumbling blocks. In the second session of the China Roadshow, Dr. Netti will discuss the practicalities of mitigating legal risks.
Dr. Netti, who works with multinational Italian companies with operations in China, advises:
“When entering the Chinese market, investors should consider the distance between China and Europe, is not only materially, but also culturally and systematically. Often, we encounter many investors who may project distrust, since the western and eastern operating models significantly differ. Although, frictions and issues can be quickly smoothed out, by pre-established and consolidated procedures. Cultural and communication differences can be overcome without further uncertainties.”
Protecting the Investment
At each stage, investments shall be protected. Generally, protection is overlooked, and the investment can be vulnerable. Drafting strong and structured contracts is essential in protecting the investment, but often underestimated by investors. Dr. Netti states:
“In any negotiation, from the simplest to the most complex, drafting a robust written contract is essential. Contracts are legally binding and essential tools when disputes arise. At Horizons Corporate Advisory, the professionals hold more than thirty years of experience in assisting foreign investment in China. Therefore, the advisors are committed to developing practical business solutions with legal certainty.”
Foreign Investment Law: Regulation Reforms
Over the past years, regulation reforms have streamlined business administration and optimised the business environment. What’s more, the Foreign Investment Law of the People’s Republic of China (“FIL”), effective from 1 January 2020, sets equal treatment for domestic and foreign entities and strengthens the protection of foreign investor’s rights and legitimate interests. Dr. Netti notes that: “The FIL is an unquestionable operational security framework which every company can benefit from it. At the same time, adherence to the FIL cannot be ignored. For foreign companies operating in China, organizations and investment amendments shall be observed before 2025. Companies should utilise this 5-year transition period to evaluate the business dynamics. For certain, companies cannot delay the required changes.”
Foreign Investment Law: Obligations and Prospects
The promulgation of the FIL provisions both obligations and prospects for foreign investors. In the China Roadshow, we include an in-depth analysis of FIL specifically dedicated to companies with a consolidated presence in the Chinese market. Particularly, the sessions will offer main tools for corporate administration and control, protection of shareholders and current financial and production strategies to be implemented in China. These crucial factors are key in long-distance business development and protecting Italian investments.
If you have questions or concerns related to the foreign investment in China or other related matters, please contact Horizons at firstname.lastname@example.org to schedule a consultation session. Horizons can provide insight, expertise and the right solutions for you.