The Standing Committee of the National People’s Congress abolished the approval requirement for foreign projects in China (FIEs, including wholly foreign-owned enterprises and joint ventures) in September. No longer do such projects have to undergo the time-consuming and sometiems costly approval process, unless they fall within a negative list (discussed below). Projects not on the negative list need only make a simplified record filing through an online system no later than 30 days after issuance of the Business License.. Continue reading
The Ministry of Commerce released the PRC Foreign Investment Law (Draft for Comments) (“Draft Law”) in early 2015 for public comment. Although some provisions may change in the final version, which is still under revision and expect to be promulgated is late 2016 or 2017, the Draft Law represents a paradigm shift for foreign investment. It includes both good and bad news for U.S. investors in China. Continue reading
The PRC Foreign Investment Law (Draft for Comments), released in January, promises to substantially change the foreign investment regime in China (see Feb 2015 China Bulletin). The revised law, when issued, will level the playing field by effectively eliminating “foreign invested enterprises” (FIEs) as a separate category in many industries in China. It will allow an FIE to be registered almost as quickly Continue reading
The 6th revision of the Foreign Investment Industrial Guidance Catalog (Catalog) became effective April 10, 2015, replacing the 2011 5th revision. All versions of the Catalog have served to regulate the inflow of foreign investment into China. The 2015 Catalog does not adopt a negative list, as implemented in the free trade zones, but it substantially reduces the number of industries in the restricted category, Continue reading
The State Administration of Taxation (SAT) issued an announcement on March 10, 2015, (Notice 14) on enterprise income tax issues following from the Encouraged Foreign Investment Project Catalog for Central and Western China (Central & Western Catalog), as supplemented by the Catalog of Encouraged Industries in the Western Region, released by the National Development and Reform Commission and effective from October 1, 2014 Continue reading
Giving with One Hand, Taking with the Other:
The Ministry of Commerce released the PRC Foreign Investment Law (Draft for Comments) on January 19 for public comment.
On the positive side, the Draft Law 1) replaces the encouraged, restricted and prohibited industry lists with a single “negative list” of industries restricted or prohibited to foreign investment, 2) replaces the foreign investment approval system and its time-consuming procedures with a simpler reporting system for non-restricted industries, and 3) repeals the current three foreign-invested enterprise laws (for wholly-owned subsidiaries and joint ventures), reverting to the PRC Company Law as the uniform basis for corporate structure and governance. 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 National Development and Reform Commission (NDRC) issued the revised Encouraged Foreign Investment Project Catalog for Central and Western China (Central & Western Catalog). The revised Catalog, which became effective June 10, 2013, provides favorable policies and incentives to 500 manufacturing and labor-intensive industries and service sectors that are located in the central and western provinces of China and Hainan Island. It expands the types of eligible foreign investment being encouraged, and adds over 170 additional key target sectors. Continue reading