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China passes anti-monopoly law, with provision for security check on foreign firms

China passes anti-monopoly law, with provision for security check on foreign firms

China's legislature passed an anti-monopoly law Thursday that will require purchases of Chinese companies by foreign firms to go through a national security check, state media said.
The official Xinhua News Agency said the Standing Committee of the National People's Congress "adopted the anti-monopoly law to ensure fair competition and regulate market order."
The law will come into effect on Aug. 1, 2008.
With eight chapters and 57 provisions, the new law bans monopolistic agreements and practices such as cartels and price-fixing but allows for monopolies "that promote innovation and technological advance," Xinhua said without giving specifics.
It also provides for investigation and prosecution of monopolistic practices, Xinhua said.
China began drafting the law in 1994 and a first draft was completed in 2003.
But progress was stymied by controversy over how to carry out enforcement, given the prevalence of state-owned monopolies or semi-monopolies in many industries.
Analysts have said the law could help China protect its fledgling domestic industries from multinational competition, while others said it would curtail the power of state-owned enterprises.
State-run companies have retained control over sectors that Beijing deems crucial for economic security, such as telecommunications, energy, and railways.
Beijing officials have said the legislation would not discriminate between domestic and foreign companies.
"The law requires foreign purchases of Chinese companies to go through national security checks," Xinhua said without providing further details.
The American Chamber of Commerce in Beijing issued a statement saying it welcomed the law "as a positive step in China's ongoing development of a market-based economy."
The law is a "defining moment in the development of China's legal system, which establishes a basic framework to build a fair, uniform, and national competition law system that benefits consumers by recognizing and preserving the incentives to compete," chamber chairman James Zimmerman said in the statement.