Identification Of Foreign Investor From "Foreign Investment Law (Draft)" Perspective

Since the reform and opening up,chinese scholars began to put forward the concept of foreign investment,but definition of foreign investors and the delimitation of foreign capital still lack of detail,relevant provisions are scattered in the Law on Chinese-Foreign Equity Joint Ventures,the Law on Foreign Capital Enterprises and the Law on Chinese-Foreign Contractual Joint Ventures and other laws and regulations.China's current regulation of foreign investment do not clearly stipulate the criteria for the determination of foreign investors,incorporation theory is the standard of foreign investors' identification in practice.As a result of China's current investment policy and the use of incorporation theory,"fake"FDI which chinese enterprises enjoy tax and land transfer benefits by using an offshore structure occurs,and the situation that foreign investment entities through the VIE(variable interest entities)structure into the field of negative list has become the norm.This makes it necessary for an accurate definition of foreign investors.Foreign Investment Law(Draft)(hereinafter referred to as "Draft FIL" or "the Draft")will replace the three existing foreign investment laws and it will significantly change the existing regime of foreign investment and become the basic law regulating all foreign investment activities in China.The introduction of Actual Control is essential for the precise definition of foreign investors,particularly the "Control" need to be discussed.This paper intends to discuss the definition of foreign investors as the object of study from the content of the Draft,the paper is composed of the following sections,each of which proposes issues for discussion or introduce the relevant background.Section 1 provides a brief overview of foreign investment legislation,the use of incorporation theory give foreign investors and Chinese investors a great freedom of choice,left the loopholes in application of foreign investment regulations.Section 2 analyzes the relevant elements of foreign investors from a macro perspective and micro perspective.Discusses the question of what kind of subject can be identified as an investor,what kind of behavior can be identified as investment,administrative departments and judicial department's management of foreign investment interact with the definition of "foreign investors".Section 3 summarizes the basic theories in the definition of foreign investors,including incorporation theory,seat theory,control theory and hybrid theory,advantages and disadvantages of each theory will be analyzed.Two ICSID cases would be the example to explain the development and application of incorporation theory and control theory.Section 4 introduces the contents of Actual Control and combs the definition of"control" in China's current regulations,and analyzes the degree of "control" with the jurisprudence and practice.Government are suggested to extend the scope of control and explain the implementation details through various cases.Section 5 summarizes the specific problems of the Actual Control,including the VIE structure and the link with relevant laws.