This content is from: Local Insights

China

On May 31 2001, China's MOFTEC promulgated the Supplemental Provisions (2) to the Establishment of Companies with an Investment Nature by Foreign Investors Tentative Provisions relaxing earlier restrictions on the activities of foreign investment companies (FICs).

FICs can now:

  • set up and sponsor foreign funded companies limited by shares and hold non-listed shares in these companies;
  • provide technical training to relevant domestic distributors and agents of enterprises in which they had invested (invested enterprises), and to any enterprises with which they or their parent company have entered into technology transfer contracts;
  • play a greater role in invested enterprises by being allowed, subject to certain restrictions, to purchase and integrate the products of these enterprises for domestic and international distribution; and
  • subject to the necessary approvals, conduct trial sales of products imported from their parent company prior to their invested enterprise starting production of the same. The annual import value of trial products must not, however, exceed 20% of the registered capital contributed in cash of the invested enterprise.

For business activities in the last three categories, an FIC's registered capital must be at least $30 million and capital must have been paid in on schedule in accordance with the relevant articles of association and joint venture contract. FICs also need to show that they have operated their business legally without any record of violations of law.

Aimed at attracting further foreign investment, these measures will play their part in, among other things, indirectly stimulating better corporate governance in China.

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