On January 19, 2015, China’s Ministry of Commerce (“MOFCOM”) released for public comment a draft Foreign Investment Law; “FIL”) along with an accompanying explanatory note (“Note”). The deadline for comments is February 17, 2015.

The draft FIL contemplates a paradigm shift in China’s approach to the regulation of inbound foreign investment. It contemplates the elimination of the current foreign investment approval regime and, with it, the equity joint venture, the cooperative joint venture, and the wholly foreign-owned enterprise, historically the three main corporate vehicles for foreign investment transactions. In place of the current approval regime, the draft FIL contemplates a more limited regulatory approval requirement applicable only to projects of a size and in sectors stipulated in a so-called “negative list, ” adopting an approach mirroring that which was first implemented in 2013 on a pilot basis in the Shanghai Free Trade Zone (see our prior client alert on the Shanghai Free Trade Zone ). Assuming the law in its final form reflects this same approach, the FIL should streamline regulatory formalities applicable to foreign investment transactions and, depending on what the “negative list” ultimately includes, result in further opening of the Chinese market to foreign investment.