Deal structuring in China is always an exercise in creativity. Investors are constantly trying to find sensible and workable ways to fit the square pegs of the optimal business structure into the round holes permitted by the Chinese regulatory regime. This task is made even more challenging by the more limited set of deal structuring tools available to investors in China.
Foreign investors that reflexively attempt to replicate offshore deal structures in the onshore legal environment in China will often end up disappointed or bewildered or both. Two simple cases in point: (1) a foreign investor in an investment structure involving multiple related new greenfield entities often will wish to set up one or more of the entities as subsidiaries of the primary foreign-invested enterprise (FIE) to achieve better integration in terms of overall transaction management; or (2) the foreign investor will want to use an existing FIE to acquire...