According to the Interim Provisions Concerning the Investment within China of Foreign-invested Enterprises jointly issued by the Ministry of Foreign Trade and Economic Cooperation and the State Administration for Industry and Commerce, investment within China of foreign-invested enterprises refers to Sino-foreign equity joint ventures, Sino-foreign contractual joint ventures and wholly foreign-owned enterprises which are established within China according to law in the form of a limited liability company, as well as the establishment of enterprises in their own name, or purchase of equity shares from other enterprises (hereinafter referred to as "invested companies") within China by foreign-invested joint stock companies limited.
1). Conditions for a foreign-invested enterprise to make investment in China
a. Its registered capital has been paid off;
b. It has started to make profits;
c. It has been conducting business operations according to law and has no track record of illegal business operations.
d. The cumulative amount of investment within China made by a foreign-invested enterprise shall not exceed 50 percent of its net assets; in the wake of investment, the amount of the capital increase from the profits of the invested company is not included here.
e. For investment within China, foreign-invested enterprises should, for reference, consult the Interim Provisions for Guiding Foreign Investment and the Industrial Catalogue for Foreign Investment. Foreign-invested enterprises shall not make investments in the fields in which foreign investment is prohibited.
2). Examination and Approval Procedures
a. To establish a company in the encouraged or permitted categories, a foreign-invested enterprise shall file an application with the company registration authorities in the locality where the invested company is to be located. The company registration authorities shall, in accordance with the relevant stipulations of the Company Law and the Rules for the Administration of Company Registration of the People"s Republic of China, decide whether to grant registration or not. Should registration be granted, a Business License of the Enterprise Legal Person is issued, and the note of "investment by foreign-invested enterprise" is added in the column of enterprise classification [hereinafter abbreviated as (annotated) Business License].
b. To establish a company in the restricted category, a foreign-invested enterprise shall file an application with the authorities for foreign trade and economic cooperation at the provincial level in the locality where the invested company is to be located. Upon receipt of the above-mentioned application, the examination and ratification department at the provincial level shall, in line with the invested company"s scope of business operations, consult the opinion of the regulatory authorities at the same level or at the national level.
If the examination and ratification department at the provincial level gives permit to a foreign-invested enterprise, the enterprise shall, upon presentation of the permit, file an application for registration with the company registration department in the locality where the invested company is to be located.
The company registration department shall, in accordance with the relevant stipulations of the Rules for the Administration of Company Registration, decide whether to grant registration or not. Should registration be granted, a (annotated) Business License will be issued.
c. In cases where a foreign-invested enterprise purchases equity shares from the invested company whose scope of business falls into the encouraged or permitted categories, the invested company shall file an application for registration alteration with the previous registration department.
In cases where the invested company"s scope of business involves fields in the restricted category, the foreign-invested company shall go through the procedures specified in Item b. The invested company shall, upon presentation of the permit by the examination and ratification department at the provincial level, file an application with the previous company registration department for registration alteration.
The company registration department shall, in compliance with the relevant stipulations in the Rules for the Administration of Company Registration, decide to grant registration or not. In cases where registration is granted, a (annotated) Business License will be issued.
d. Should the invested company be a foreign-invested enterprise, procedures should follow the Provisions on the Alteration of Investors Equity of Foreign-invested Enterprises.
e. Investment within China made by investment companies established with foreign investment shall follow the state laws and regulations concerning foreign investment as well as the Provisional Regulations Concerning the Establishment of Foreign-funded Investment Companies.
f. Investment within China made jointly by foreign investors and foreign-invested enterprises shall follow the state laws and regulations concerning foreign investment. In such an investment project, the percentage of investment contributions by foreign investors shall generally not be lower than 25 percent of the registered capital of the invested enterprise.
3). Treatments for Foreign-invested Enterprises Which Make Investment in China
The state encourages foreign-invested enterprises to invest in the central and western regions. If the percentage of foreign investment in the registered capital of the invested company is not lower than 25 percent, the invested company can enjoy the treatment available for foreign- invested enterprises.
An invested company in the central and western regions shall, upon presentation of the Approval Certificate for Enterprises with Foreign Investment and the (annotated) Business License, enjoy the treatment available for foreign-invested enterprises as provided for by laws and regulations.