China's Foreign Investment Treatment

China like any other market economic countries needs open its market to receive the international investments and also needs to invest overseas. Especially under the background of the China's individual characteristics and economic development at present, China surely needs to attract abundance of foreign investment to develop its own economy. Therefore, the in-depth study on foreign investment treatment becomes a rather important issue. On the basis of the exact definition of national treatment, from its humanistic value and basic meaning, this paper use WTO rules to explain national treatment and clarify the applicable standard of national treatment and its specific meaning in WTO system.China's foreign investment treatment from legislation to practice has its own particularity as being restrained by the time and China's individual reality. On legislation level, a system of special legislationPrecisely defining basic concepts, this Paper begins with discussion on the human and cultural value of national treatment. It puts the analysis in the context of WTO rules, and further clarifies the applicable standards for national treatment and its concrete meaning under the WTO system.Restricted by today's era and its individual domestic reality, China has its particularity in the treatment of inbound foreign investment in terms of both legislation and practice. With regard to legislation, a relatively complete legal system governing foreign investment has been instituted in China. It includes the Constitution, specially purposed laws by the central government and rules and regulation formulated at local levels. However, there are still issues of non-compliance with either our bilateral treaties or WTO rules, which requires timely solutions. What is worth mentioning is that the newly published"Income Taxation Law for Enterprises"legalises the treatment for foreign enterprises on taxation issues and the new law has also stipulated that bilateral treaties shall be pursuant when inconsistence occurs, moving relevant Chinese legislature further towards our bilateral treaties. We may have inspirations when looking at relevant foreign investment legislation of the US and ROK; Concerning practice, national treatment are not applicable in all sectors, and the extent to which national treatment applies may vary in the two phases of foreign investment, investment access and investment operation, respectively. While China expands the scope for application of national treatment in dealing with foreign investment, it should consider and differentiate the pace and urgency of specific steps to be taken. As a developing country that has not graduated from economic reforms and whose economic development is still backward, China finds useful with preferential treatment and non-national treatment in some sectors, which need to be gradually eliminated through the development of the economy. This Paper discusses the irrational existence of preferential national treatment and non-national treatment in the country, the absence of a universally accepted parameter for application of national treatment and the contravention between higher level laws and lower level laws as well as the inconsistence between domestic legislation and WTO rules and our bilateral treaties.On the basis of the above discussions and analysis, the Paper points out the trend of China's foreign investment treatment and puts forward corresponding proposals. On the one hand, China is still a developing country in spite of its economic achievements. Due to the fact that domestic enterprises are not at the same level with foreign invested enterprises in terms of competitiveness, some differentiated legal protection is required for domestic enterprises to ensure a balanced and steady economic development. On the other hand, against the background of increasingly liberalised international investment across the globe, our country has comparative advantage in gradually moving towards national treatment on foreign investment access. In view of the various problems in China's foreign investment legislation and practice, and the domestic and international trend, the author proposes the following: gradually moving towards unifying domestic economic legislations, instituting a universally applicable standards for foreign investment treatment, step-by-step elimination of non national treatment for foreign investment, rectification and adjustment of local laws and regulations for better WTO compliance, and formulating a systemically complete and forward looking foreign investment law. What's worth noting is that some foreign investment policies that China adopts at this stage to serve as either incentives or restrictions have reasonable rationale. There also exist reasonable exceptions in terms of national treatment. All in all, we must further optimize our investment environment. We should gradually reduce the practice of attracting foreign investment with preferential policies and increasingly observe international practice. We should also eliminate the differentiated treatment between domestic and international investors, creating an environment for fair competitions.