CHINA Trends and Developments Contributed by: Huihui Li, James Hu, Yingjie Kang, Sherry Xu, Bivio Yu and Lisa Zhao, Fangda Partners
Foreign Investors Now Have Easier Market Access but Higher Compliance Costs With the Foreign Investment Law taking effect at the beginning of 2020, China’s foreign investment regime has officially evolved from a case-by-case approv - al system – in place for over three decades – to a new system where foreign-invested companies and domestic companies are treated almost equally in terms of their establishment and corporate changes, with the exception of a small number of sectors under the negative list. However, as China’s legal system has been evolving, compliance costs for many market players, includ - ing domestic enterprises and foreign-invested enter - prises, have also increased. For example, the Chinese government is more serious about enforcing environ - mental and labour regulations. As a result, high-pol - lution industries and labour-intensive industries have been relocating to South Asia where compliance and labour costs are lower. In 2025, substantial legislative developments were made to strengthen the protection of older employ - ees, refine competition restrictions in the employ - ment context, and improve data protection regula - tions. These new pieces of legislation, accompanied by tightened law enforcement, suggest increasing compliance costs for companies in the future. Some foreign-invested manufacturing companies have been relocated to Southeast Asia due to lower costs and to avoid geopolitical risks and export control measures, while the majority of foreign-invested companies have chosen to remain in China to stay close to the market and supply chain. Local policies on foreign direct investment (FDI) have also become more selective on technology and new investment sectors in order to promote high-tech industries, representing a shift from quantity to quality. New Trend of Investment In the context of a challenging global economy, for - eign investment in China showed strong resilience in 2025. According to data from China’s central govern - ment, FDI in the first nine months of 2025 grew by 16.2% compared to the previous year, reflecting not only the continued attractiveness of the Chinese mar -
ket but also the steady confidence of foreign investors in China’s long-term economic prospects. Encouraged by the government’s recent policies to further open up high-end manufacturing, green devel - opment and digital industries, a number of multina - tional corporations have expanded or reinvested in their China operations. However, under a tightening regulatory environment, some M&A financings in the TMT sector were tem - porarily suspended. Investors, especially those from overseas, have become more selective, tending to focus on more established targets and prioritising investments in semiconductors and intelligent hard - ware, EV OEM and related industries, newly emerging Metaverse and Web 3.0 fields, and the new energy sector. This trend is consistent with the government’s commitment to steering China’s economy toward more innovative and sustainable growth. China’s goal of achieving “carbon peak and carbon neutrality” has also generated new opportunities, such as green finance. More green, blue (financing ocean-related conservation projects) and sustain - able development bonds have come to the market, expanding the range of products on China’s domestic debt markets. The promulgation of new panda bond guidelines and the roll-out of the pilot programme for social and sustainability panda bonds are expected to channel more funding into the green, social, sustain - ability (GSS) sectors and further open up the bond market. Trends in Merger Control On 1 August 2022, China’s revision of the Anti-Monop - oly Law (AML) came into effect, introducing significant changes to the country’s merger control landscape. In March 2023, the State Administration for Market Regulation (SAMR) finalised the Regulation on Review of Concentration of Business Operators, further clari - fying the law’s implementation. On 26 January 2024, the Provisions of the State Council on Thresholds for Prior Notification of Concentration of Undertakings (the “Amended Thresholds”) came into effect. The Amended Thresholds represent a significant increase in these thresholds, particularly in China turnover.
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