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Investment Guidelines in China

Investment Guidelines in China


1. Prepare to Invest in China

If your company is ready for investing in China, You need firstly to know the China market situation and learn about the investment policies by Chinese government. The Chinese government has divided its industrial projects for investment into four categories classified as encouraged, permitted, restricted and prohibited. They are indicated in the Industry Category Guide for Foreign Investors. Secondly, the scale of the investment amount is also worth noting. For large investment projects of USD 30million or above, the approval authority rests on central government (State Council ministries); for projects under USD30million, in the unrestricted category or quota free, or license free, the approval authority goes to local government departments.



2. Find out Responsible Authorities

The State Development and Reform Commission and the Ministry of Commerce are responsible for review and approval of projects with total investment of USD30million or above or other projects that require special approval.

However, The local development offices and commercial departments of Provinces, Autonomous Regions, Municipalities are responsible for review and approval of the following projects:

1. Projects with total investment under USD30million and in the unrestricted category;
2. Projects under USD30million, but in restricted category which have to be filed to the State Council ministries or upper level offices; Projects involving quota issue or license matters have to go through applications to the departments of the Ministry of Commerce for consent
3. Projects with USD30 million or above in the encouraged category, but with no future side effects, which have to be filed in the State Council ministries.


3. Learn about Procedures for Project Set-up

* For Joint Ventures with Equity or Contractual partners

Project Proposal
Feasibility Study
Articles of Association
Certificate of approval
Business License

How many steps?

First step: Prepare and apply for project proposal

On the knowledge of both partners' business area and financial status, the Chinese side is supposed to produce a project proposal to be submitted to the State or local development and reform department, or the technological renovation department for examination and approval. If approved, the Chinese side shall go to register the joint venture for protecting the company name and trademark.

Second step: Prepare and apply for feasibility study

Once the first step is finished, you and your Chinese partner are supposed to work jointly on a feasibility study which involves markets, capital, planned site, craftsmanship, technology, facilities, environment protection, raw material sales and purchases, economic yielding, proportion of local currency and foreign currency injection, infrastructure…etc. to be submitted to the State or local Development and Reform department, or the Technological Renovation department for examination and approval. Concurrently both you and your Chinese partner can prepare to discuss and sign a contract and other legal documents such as articles of associations.

Third step: Obtain a certificate of approval

After the feasibility study is approved, you can submit the signed contract and the articles of associations to the Ministry of Commerce or local trade and economic bureaus for examination and approval. Once the approval is granted, a certificate of approval for the joint venture is issued.

Forth step: Apply for Business License

Starting from the date of receiving the certificate of approval for the set-up of a joint venture, you and your Chinese partner shall apply to the industrial and commercial department for registration to get a business license. The date of the license is the date of the establishment of the joint venture.


* For Wholly-Foreign-Owned Enterprises

If you or your company wishes to set up a branch or a subsidiary or a totally new company in China which is 100% owned by yourself or by your company, you can entrust a qualified agency to fulfill all the procedures of application and approval of a foreign enterprise in China. The procedures are simple: to fill up the application form for setting up a foreign enterprise in China; to submit the articles of association and relevant legal documents to a local trade and economic department. Observed by the rules on Foreign Invested Enterprises, the local authority office is to grant ( or not grant ) an approval. If granted, the local authority is to issue a certificate for the wholly foreign-owned enterprise. The registration and license are proceeded with the certificate. When a business license is received, you have to go through relevant registrations, such as opening up a bank account for both Chinese and foreign currencies, tax registration, customs registration, foreign currency registration, business inspection and recruitment procedures.



4. How about Investment Environment in China?

Since 1979 when the Law on Chinese-Foreign Equity Joint Ventures was first introduced in China, the work of utilizing foreign investment as an important subject of opening up to the outside world initiated as China's fundamental principle.

Over the past 24 years, Chinese macro economic environment provided realistic guarantee and broad prospects for foreign investment. The national economy in the early period, increased by two digits, in the later period of the 1990s, the growing speed still reached at 7-8% each year. The GDP in 1997 stood at RMB 7,446.3 billion in 2000 at RMB 9,593.3 billion and in 2002 at RMB 10. 2398 trillion.
The facilities of hard environment in China has been greatly improved or upgraded. The infrastructure constructions like transport, telecommunication, water, electricity and gas supply, etc. have been completely renovated.

Along with the favorable production management conditions, the soft environment for easy access to investment requirement has gradually been amended to its perfect. A one-stop service for examination and approval has been introduced in many local government organizations: offices of different functional departments are co-working to speed up the procedures. The laws and regulations have been reinforced to adapt to comfortable legal environment. Since China's access to the WTO, the commitments to the WTO entry, the opening degree of the industries are attached great importance.                        


5. How Many Investment Forms Available in China?

What kind of investment forms is available in China? Which form is fit for you or your company? If you read carefully, you can make a right choice of it. In China, The absorption means of foreign capital are basically divided into direct investment, foreign Government Loans, UN organizations and other sources. The direct investment forms, which are popularly operated in China, include Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures, wholly foreign-owned enterprises, joint exploitation, foreign-funded share holding companies, joint development, compensation trade and processing and assembling, etc.



6. Any Legal Aspects to Comply with?

To improve the legal environment and to create a unified, consistent and steady, pragmatic and feasible investment environment, the legal system is geared to open, just and transparent principle. Since 1979, the legal framework has gradually been structured and completed and constituted a set of sophisticated legal system.



7. Try to Enjoy Maximum Privileges and Preferences

If you or your company decides to invest in China, the first and foremost importance is to know as much as you can the preferential policies available in China, so that you can enjoy the preferential treatment at maximum level.
China has provided a number of preferential policies to stimulate overseas investment. For encouraged industries, such as infrastructure facilities, apart from the preferential terms, you can even expand your business scope; for the purpose of promoting the economic development in middle and west China, the geographical policies are introduced to apply to different regions. Tax and Tariff preferences are the core issue that companies concern most. For foreign invested companies, the taxes may include corporate income tax, personal income tax, turnover taxes (value-added tax, consumption tax and business tax), land tax, stamp duty, vehicle and vessel tax, urban real estate tax, etc.; for import and export, tariff and import-stage value-added tax may involved.


8. Where to Invest? To Find a Good Place to Start with

Along with China's opening door policy going on adopted in 1979, the opening zones with different orientations and functions have been extended down to various regions which include special economic zones ((Shenzhen, Zhuhai, Xiamen, Shantou and New Area of Pudong in Shanghai), national economic & technological development zones (ETDZ), national free trade zones (FTZ), national hi-tech industrial development zones (HIDZ), national Taiwanese investment zones (TIZ), national border & economic cooperation zones (BECZ), national export processing zones (EPZ), national tourist and holiday resort (THR). You or your company may make a research and lock in a particular zone to test your choice.




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