The Ministry of Commerce has recently decentralized its approval powers with respect to foreign-invested commercial enterprises, delegating the power to approve the establishment of and changes to such enterprises to its provincial counterparts. The provincial governments are eager to attract foreign investment and the change should make it much simpler to establish a foreign-invested commercial enterprise.
Various government departments have jointly issued Implementing Opinions on Certain Questions Concerning the Laws Applicable to the Administration of the Approval and Registration of Foreign Investment Companies. The opinions restate much current law but also aim to clarify certain principles in China's foreign investment regime that overlap or conflict with the revised Company Law and the Company Registration Regulations.
The amendments to the Regulations on the Administration of Company Registration bring the rules into line with the newly amended Company Law and clarify various points related to registration. They also increase the financial penalties for non-compliance which may be imposed on companies and their directors.
A number of local administrations for industry and commerce in China have stopped accepting applications to register liaison offices and will not renew existing registrations. Foreign-invested enterprises that have used liaison offices to minimize tax liability may wish to evaluate the options offered by a branch structure.
Including: Foreign Investment and Registered Capital; Dividends, Voting Rights and Equity; Share Transfer and Directors' Accountability; Shareholders.
As individual members of a corporation's decision-making body, directors do not usually bear personal liability for the actions of the corporation. Nevertheless, in certain circumstances directors can be personally liable for damages to others as well as to the company itself. A director may even bear criminal liability in some situations.
The Ministry of Commerce has issued a notice regarding foreign investment in distribution activities in China. Before the issuance of the notice, there was limited guidance on the procedures for existing foreign-invested enterprises to include distribution in their business scopes.
Entertaining and giving gifts are part of doing business in China. However, foreign investors are often uncertain about where to draw the line between appropriate gifts on the one hand and bribes on the other. If the authorities conclude that a certain gift constitutes a bribe, foreign companies may face criminal, administrative or civil liability.
Under the Provisional Measures on Administration of Foreign Debts, the cumulative amount of 'medium and long-term' and balance of 'short-term' foreign exchange debts borrowed by a given foreign investment enterprise (FIE) is subject to, and cannot exceed, the difference between the amount of total investment and registered capital of the FIE.
Regulators have issued a long-awaited policy document setting forth guidelines for the development of the automotive industry in China. The provisions both tighten regulation of the industry in order to encourage the development of a globally competitive automotive industry, and promote the use and ownership of motor vehicles.
Multinationals contemplating the outsourcing of research and development (R&D) functions are increasingly finding China a compelling venue for cost-competitive and market-responsive R&D. Special incentives are available for formal R&D centres, while multinationals can also establish ordinary foreign-invested enterprises to engage in R&D without meeting the higher formal level of approval.
The Provisional Regulations for the Supervision and Administration of Enterprise State Owned Assets were recently adopted. Among other things, the regulations aim to establish a system for the supervision and administration of state owned assets which meets the requirements of a socialist market economy, and further improve state owned enterprises.
New rules allow foreign investors to position themselves to take advantage of foreign trade opportunities before the full liberalization of foreign trading rights by December 2004. The new rules lower establishment thresholds and remove geographical restrictions. However, foreign investors are limited to establishing an equity joint venture.
Foreign-invested enterprises and domestic enterprises alike will benefit from increased transparency under China's new Government Procurement Law. The law requires that all government procurement "must comply with the principles of openness, transparency, fair competition, impartiality and good faith".
There has been speculation as to whether the People’s Bank of China intends to introduce regulations restricting the level of borrowing that foreign banks are able to obtain in loans from PRC banks. Some view this is a step backwards.
The Chinese governemnt has introduced a raft of new rules that increase the regulation of foreign-exchange transactions and impose severe sanctions on illegal operations.
In November 1999 China and the United States signed an agreement for China’s accession to the World Trade Organisation. This agreement marks a significant breakthrough for foreign investors, particularly those in restricted industry and service sectors.
The Chinese government has planned to significantly expand its gas infrastructure and to shift a large part of energy consumption from coal to natural gas. With the government’s offer of tax and other incentives, foreign investment opportunities in this industry have never been greater.
Including: The Legal and Business Environment; Forms of Investment; Choosing a Form of Investment; Amount of Investment; Procedures for Operation; Choosing a Location; Property Issues; Tax Issues; Finance Issues; Profit Repatriation; Protecting Intellectual Property and Technology; Local Staff; Dispute Resolution