Following the opening of the Shanghai Free Trade Zone (SFTZ) in September (Aug.-Sept. China Bulletin), at least 12 foreign bank branches and 1,400 companies have registered in the SFTZ, and more than 6,000 are applying to register. A series of new announcements and regulations have been issued opening value-added telecoms services (see SFTZ VATS Opening), relaxing foreign investment approval requirements, permitting resident and non-resident free-trade bank accounts, liberalizing foreign exchange for trade and investment, reducing restrictions on cross-border securities investment, clarifying import tax policies, opening performance agency and entertainment venue operations to foreign investment, and producing and selling video game equipment (see below). Industries where foreign investment is restricted in China proper, like securities and gold trading, are targeting the SFTZ. Continue reading
The process to establish a wholly-owned subsidiary (called a wholly foreign-owned enterprise or WFOE) in the Shanghai Free Trade Zone (SFTZ) is summarized below for companies that are not on the negative list. The process closely follows other areas of China, but no foreign-investment approval is required.
1. WFOE Establishment
- prepare application form and documents and Articles of Association and coordinate with government authorities during the application process
- locate premises, sign lease agreement and register lease as pre-condition to applying for Business License
- select name and apply for enterprise name reservation
At an executive meeting of the State Council on October 25, China’s Premier, Li Keqiang, announced far reaching reforms of China’s company registration system to eliminate minimum capital requirements and mandatory time limits for capital contributions when registering a company, substitute an annual reporting for the current annual inspection system, share registration information through and enterprise credit system, implement electronic business licenses, and offer greater flexibility for company addresses used for registration purposes. In principle, the reforms also apply to foreign invested enterprises (FIEs), but the higher minimum capital requirements, not formalized in law in most locations, could still apply. Continue reading
The Ministry of Commerce issued the Announcement on Issues regarding RMB Cross-Border Direct Investment, with effect from January 1, 2014 (English version). The announcement permits foreign investors (including investors from Hong Kong, Macau and Taiwan) with RMB held outside mainland China to use it in China to establish companies, increase capital, purchase Chinese companies and participate in mergers and acquisitions and other direct investment activities. The RMB funds may not be used to invest in negotiable securities, financial derivatives or entrusted loans in China. Continue reading