China clarifies rules on foreign investment through local subsidiaries

Author: | Published: 1 Nov 2000

Chinese trade authorities have ended a long period of uncertainty by clarifying their rules on foreign indirect investment. As of September 1, foreign-invested enterprises are able to invest in Chinese entities, in many cases without having to gain Ministry of Foreign Trade and Economic Cooperation (Moftec) approval.

Moftec and the State Administration of Industry and Commerce (SAIC) issued the Interim Provisions on Domestic Investment by Foreign-Invested Enterprises on July 25 2000. They became effective on September 1. The Provisions provide a clear legal basis for foreign-invested enterprises to invest in other PRC entities (including other foreign-invested enterprises), subject to various qualifications and conditions, and Article 12 of the Company Law. The Provisions also allow for this investment to be undertaken, in some cases, without the approval of any body in the Moftec system (leaving it to the registration or SAIC system authorities), and allow for traditional foreign-invested enterprises to act as investors in, or promoters of, companies limited by shares, without Moftec...