On the whole, the law pledges “equal treatment” for foreign companies operating in China, but reserves the right to a “review of foreign investment that affects or may affect national security”.

The draft law is viewed as an attempt by China to avoid an escalation in the US tariffs placed on US$250 billion of its exports, which are due to rise from 10 per cent to 25 per cent on March 2 if Washington’s demands are not satisfied.

FIL was actually first drafted in 2015, but was only revisited at the end of 2018 in a response to the reported exodus of international companies from China.

Spooked by the long-standing issues around investment protections and rising costs, as well as by the more recent geopolitical headwinds emanating from the trade war with the United States, companies have been moving their supply chains out of China in droves.

With the clock ticking, the law is moving with unprecedented speed through the notoriously sluggish legal system, as China looks to reassure companies and investors that it is a safe place to do business.

"Usually it would take the National People's Congress (NPC) two to three years to complete the cycle from drafting to approving the laws,” said Wang Jiangyu, an associate professor on the National University of Singapore’s law faculty.

“And now, the NPC aims to pass the law in March. I am very sure that the pressure from the US is the main pushing factor.”

The law is now set for a second reading at this week’s eighth meeting of the Standing Committee of the 13th NPC, which is being held on Tuesday and Wednesday.

It is currently in a consultation period, during which stakeholders are invited to make comments about the proposed law.

Among those invited to comment are business chambers in China, which have welcomed the law in theory, with the caveat that if China is serious about treating foreign companies and domestic companies in the same way, there is no need for a separate foreign-investment law.

“We view this as a positive development and we welcome efforts to transform China’s investment regime,” said Alan Beebe, president of the American Chamber of Commerce in China.

“China always maintains that foreign companies are treated just as Chinese companies are treated. If that’s the case, do we need a foreign-investment law in the first place?”

Foreign trade officials have also voiced concerns over how the law will be implemented and whether it will be enforced.

“Making new legislation itself is definitely a step forward. But the real challenge is its practicality,” said Kim Yun-hee, a senior trade commissioner at the Korea Trade-Investment Promotion Agency office in Beijing.

“Will the new legislation be actually implemented at a practical level? Similar legislation in the past has placed itself far away from the reality.”

Referring to US grievances over intellectual property and forced technology transfer, Beebe added: “It’s better to have them mentioned than not mentioned. But I don’t think mentions in the investment law in and of themselves are going to be sufficient.”

Others are worried that as China looks to rush the law through to appease US negotiators ahead of the March 1 deadline, it may lead to passage of a less comprehensive version.

“We are concerned that the law is being accelerated to completion without sufficient consultation and review,” said Jacob Parker, vice-president of China operations at the US-China Business Council.

The implication is that a law could be passed during the two NPC meetings in March.

“It is unclear why a second reading is needed so quickly after the first reading in December when the comment deadline is in mid-February,” Parker added.

The European Union has been another forceful critic of China’s investment conditions, and along with the US, has lobbied for changes in the ability of European firms to invest in Chinese technology, as well as to protect their assets in China.

Elliot Papageorgiou, a partner at law firm Clyde & Co’s Shanghai office specialising in intellectual property, said that the law’s accelerated progress “could be viewed as a response to the dual pressure of the European Union and US in relation of such matters as forced technology transfer and lack of reciprocity”.

“China is attempting to be responsive, to say: ‘We’re hearing you,’” he said.

The European Union Chamber of Commerce in Beijing declined to comment, saying that it was “still collecting feedback from our members about FIL”.

The European Union, along with Japan, has been engaged in a long and drawn out dispute at the World Trade Organisation with China over state interference in its economy.

William Marshall, a trade lawyer and partner with Tiang & Partners in Hong Kong, said that the proposed law does not “address the fundamental demands” of the US, European Union or Japan “in the ongoing trade negotiations”.

He added: “The possibility of a real and lasting resolution is small and remote. The positions of each side remain far apart without any common ground upon which to build a compromise.”

Additional reporting by Lee Jeongho