Understanding “Foreign Enterprise Investors” in Chinese Laws: A Suggested Standard for Identification

Abstract

Identifying foreign investors is a precondition for the application of the Foreign Investment Law of the People’s Republic of China, but this law does not specify the standard for such an identification. At present, there is no uniform standard or practice in international society. The existing standards for identifying foreign investors in modern countries are the place of incorporation standard, the place of domicile standard, the actual control standard, and the compound standard. The major difference underlying these changing standards is how to confirm the actual connection between foreign investors and host countries. In the era of globalization, multinational enterprises gradually weaken their national identity, becoming closer and more consistent with the interests of domicile. Therefore, the place of domicile standard can best reflect the actual connection between investors and the country, and this standard also gives consideration to the stability and flexibility of the law. As a result, the place of domicile standard has gradually become the main standard by which many countries identify foreign investors. The identification standard of foreign investors in Chinese legislation and international investment treaties is quite confusing, but there is little doubt that the main standard is the place of incorporation standard, which leads to many problems in practice. In order to adapt to the situation of international investment, China should take the implementation of the Foreign Investment Law as an opportunity to unify domestic legislation with the place of domicile standard. At the same time, it should pay closer attention to the convergence of domestic law and international law to achieve its legislative purpose by expanding opening-up and promoting foreign investment.