The three reporting obligations outlined in the draft foreign investment law will prevent deliberate changes in the nature of a business after overseas investors setup new companies in China, as well as keeping the government better informed, experts said.

Zhao Xudong, a professor of commercial law at the Beijing-based China University of Political Science and Law, said most foreign investment, including setting up a new company, will no longer need pre-approval from the State Council.

The reporting mechanism will become a practical method to communicate between government entities and foreign companies in China.