A new regulation permits the establishment of Sino-foreign joint ventures to engage in the business of foreign trading in the People's Republic of China. At present, state-run import-export enterprises controlled by the Ministry of Foreign Trade and Economic Cooperation dominate all Sino-foreign trade.
The Provisional Measures on the Establishment of Sino-foreign Equity Joint Ventures for Foreign Trade on a Trial Basis came into effect on the date of promulgation. However, there are a number of requirements and conditions under which such enterprises may be established:
- enterprises must be limited liability companies with a minimum registered capital of Rmb100 million (US$7.7 million) (Article 4(3)(1));
- enterprises may only be established in Shanghai's Pudong New Area and Shenzhen Special Economic Zone for the time being (Article 16);
- the Chinese partner must hold stakes of at least 51% of the registered capital of the joint venture, while the foreign firm's share must exceed 25% (Article 3);
- the Chinese partner must be authorized to conduct import and export business, and have an average annual foreign trade volume of US$200 million in the preceding three years, of which exports must account for more than 50% (Article 4(2)(2));
- the Chinese partner must also have established at least three branch offices overseas with a total annual turnover of more than US$10 million in the three preceding years (Article 4(2)(3));
- the foreign partner must provide proof of US$5 billion in gross revenue in the year preceding the application and an annual trade volume with China of more than US$30 million in the preceding three years (Articles 4(1)(1) and 4(1)(2));
- the foreign partner must have had a representative office in China for at least three years or have invested at least US$30 million in China (Article 4(1)(3)).
Florence M Li and Elaine Liu