China will maintain its policy of encouraging foreign investment unchanged after the passing of the country’s first anti-monopoly law according to an official from the country’s top legislature.

An official with the Commission for Legislative Affairs of the Standing Committee of the National People’s Congress said the necessary security checks on foreign investment in domestic enterprises would pose no obstacles to the utilization of foreign capital.

Set to come into effect August 1, 2008, the law requires checks on mergers of foreign and Chinese enterprises to ascertain whether they affect national security. “China has already established basic checks on foreign investment through regulations,” the official told Xinhua.

A regulation issued by the State Council authorized government departments to initiate checks if the foreign firms “jeopardize national security or public interests” or “employ Chinese developed technology.”

Another rule jointly published by six ministries and departments requires foreign companies to submit to checks if they take control of a joint venture in one of China’s key industries. “Checks on mergers of foreign and domestic firms are practiced by many countries,” the official said, adding the law was following international practice. “The anti-monopoly law will intensify regulation of the market and help to provide a better market environment for both domestic and foreign investors.”

The official said the law would prevent State-owned enterprises in monopolistic industries such as petroleum, telecommunications, mail services and tobacco from abusing their market dominance to lower services and disregarding the public interests.