China is aware that it must make extra efforts, domestically and overseas, to appear more attractive for foreign investors.

Is that the reason why at the end of July this year, the State Council released the "Opinions on Further Optimizing the Environment for Foreign Investment and Increasing Efforts to Attract Foreign Investment"? We talk about it in the first article.

After a Recap of what you need to know about the non-use cancellation policy, we explain a case where the Court decided against a trademark owner: read what happened!

Do you know Ye Yongqing? He is a well-known Chinese artist who apparently... copied from a Belgian painter some of his work of art, becoming protagonist of one of the highest damage requests in a fine-art case in China.

For one that wins there's one that loses – here the case of Hong Kong based Johnson Electric and its Chinese name.

It was clearly not a well-known trademark: in fact, the protection for a well-known mark does not only consider the goods/services of that specific business scope but it could be extended to non-similar goods and services. In the article about Furla vs 付拉 (FULA) case, we also give some tips on how to achieve this status.

Have you ever wondered if it's really necessary to record copyright in China to have protection? Or if it's possible to record copyright if you're not the creator? Find the answers to these and other questions here.

We end this issue with a case involving the famous French designer Constance Guisset: read what happened!

But before closing, we are glad to let you know the names of HFG members chosen to serve on INTA Committees for 2024-2025 terms: good luck, team!

China further boosts foreign investment

At the end of July this year, the State Council released the "Opinions on Further Optimizing the Environment for Foreign Investment and Increasing Efforts to Attract Foreign Investment" (State Council Document No. 11, 2023) (for short, the "Opinions").

The Opinions expressly state to aim, among other things, at creating "a market-oriented, law-based, and internationalised first-class business environment" and "giving full play to the advantage of China's vast market".

In the midst of a shaky and not promising economic environment, the Opinions show that China is still counting on foreign investment to further boost its weakening economy. After having placed much effort in the development of its infrastructures, China had indicated enhancement of private consumption as the major tool to redress its economic downturn.

In addition to that, and maybe also to compensate the loss of image of the country overseas as a primary destination for investment, China is now aware that it must make extra efforts, domestically and overseas, to appear more attractive for foreign investors.

The Opinions recognise and affirm the role of foreign investment as a tool to further open up to the outside world and construct a new system for an open economy with Chinese characteristics.

Compared to the past, the image that China wishes to convey is that of a country that is more selective when it comes to attract investment.

Accordingly, the Opinions identify some key sectors and actions, towards which the efforts to attract foreign investment should be primarily directed. Those sectors and actions are:

  • biopharmaceutical sector (and, in particular, foreign-invested enterprises conducting clinical trials of cell and gene therapy drugs), by optimising the application process for the registration of production drugs transferred to China from overseas;
  • advanced manufacturing;
  • modern services, by having foreign-invested enterprises playing a demonstration role of opening-up pilot;
  • digital economy;
  • vocational education and training, by supporting the collaboration with training institutions and schools.

The Opinions also indicate a gradual opening in the sector of equity investment and venture capital, by encouraging an expansion of the areas where foreign-invested enterprises could pilot such activities.

The beginning of an opening may be seen also in the sectors of added-value telecommunication services, where examples are indicated in the domestic Internet Virtual Private Network business (with foreign equity not exceeding 50%), information services (limited to app stores, excluding online publishing services) and Internet access services (limited to providing Internet access services to users).

Finally, according to the Opinions, support should be given to foreign-invested enterprises wishing to establish research and development centres in China or collaborate with domestic enterprises on technology research and development and industrial application or undertake major scientific research projects in China.

Showing sensitiveness to foreign enterprises' complaints, the Opinions reiterate the importance that foreign-invested enterprises be granted a same level playing-field with domestic enterprises in government procurement activities – this is a topic that has often been raised by foreign investors and agencies in China representing their interests –, as well as a supported participation in standard formulation work, on an equal footing with domestic players.

The Opinions stress the importance of improving the mechanism for protecting the rights and interests of foreign-invested enterprises, in particular in the field of intellectual property rights (patent infringement disputes and enforcement of administrative rulings) - and with a special mention of intellectual property rights in the procurement of pharmaceuticals and medical consumables – and of the standardisation of the formulation of foreign economic and trade policies and regulations (by enhancing transparency and predictability and hearing foreign investors' opinions).

Acknowledging the decreasing number of foreigners resident in China, the Opinions also link the activities of foreign-invested enterprises with the presence of foreign experienced employees and managers, thereby also confirming that foreign investment cannot be efficiently boosted if foreign personnel is not more easily allowed to work legally in China.

The Opinions, therefore, recognise the importance of optimising the policies for the stay and residence of foreign employees of foreign-invested enterprises, in particular executives and technical personnel (and their families), and facilitating the application for permanent residency for foreign senior management and technical personnel.

Realising the importance of having a clear and predictable legal environment with respect to data flow, the Opinions also indicate that qualified foreign-invested enterprises should be placed in a position to efficiently conduct safety assessments in respect of the outflow of important data and personal information.

In this field, Beijing, Tianjin, Shanghai and the Guangdong-Hong Kong-Macao Greater Bay Area may be more supported in the implementation of data outflow safety assessments, personal information protection certification, and standard contract filing for personal information outflow.

On the taxation side, the Opinions aim at encouraging foreign-invested enterprises to reinvest their profits domestically, by implementing the policies of temporarily not levying a withholding tax on profits reinvested domestically by foreign investors.

Surprisingly, the Opinions also mention the implementation of tax preferential policies for foreign-invested enterprises. This may appear in contrast with the signs perceived from the past tax reforms, whereby tax treatment of foreign-invested enterprises was more and more equalised to that of domestic ones, in order to reduce and abolish the tax advantages of the former over the latter.

Also, the Opinions mention the need of providing guidance and assistance to foreign individuals for them to enjoy "tax-exempt preferential policies for housing subsidies, language training fees, children's education fees, etc.".

This indication has already been taken into consideration and implemented by China's Ministry of Finance and Administration of Taxation that, with a recent announcement (no. 29 of 18 August 2023) have extended the regime of non-taxable allowances for foreigners residing in China (mainly housing subsidies, language training fees and children's education fees) until the year 2027.

Foreign investors can certainly welcome China's will to further open up and improve its attractiveness for investments.

However, it will be important to see which implementation measures will be taken and when, especially in the sectors of public procurement, data export, visa and stay of foreign personnel, taxation of re-invested profits, before business confidence may be improved.

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