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China: updated investment approval procedures for foreign-invested enterprises

Amendments have been made to the system for approving the establishment and subsequent changes to most types of foreign-invested enterprises. This has been announced by the Chinese Ministry of Commerce (MOFCOM) and the National Development and Reform Commission (NDRC). Excluded are foreign-invested enterprises that are subject to national special administrative measures for admission, in other words those that are active in industries included on a so-called ‘Negative List’.

New system for approving the establishment in China
New system for approving the establishment in China

The new foreign-invested enterprises establishment procedures essentially replace the previous administrative approval process with a simplified filing system that reduces processing times from around 12 working days to three, and is mainly conducted online.
A foreign investor that makes an investment in any industry other than those listed in the Negative List may apply to the registration authority to register the establishment, alteration (by record-filing) or deregistration of a foreign-invested enterprise directly, and will no longer need to submit the record-filing certificate issued by the competent authority of commerce. Leo Peng from the Swiss Business Hub China reports: “Although approval from the Ministry of Commerce is generally no longer required and this one aspect of the registration process has been simplified, the overall process is still largely unaffected and is still rife with bureaucratic red tape.”

How the new filing system works  

Foreign-invested enterprises can now be incorporated by means of the simplified filing process with their local MOFCOM branch. Eligibility for the new procedure hinges on whether or not the scope of business is restricted by the Negative List for Foreign Investment. The filing procedure is carried out online via a dedicated information system, with the required documentation cut down to just an application form, letter of undertaking, business license, and power of attorney appointing the representatives to make the application. Although the application procedures have undoubtedly been streamlined, the new system is somewhat stricter regarding supervision: Foreign-invested enterprises that do not meet the filing requirements will be subject to tougher supervision by the Commerce Committee, which is more inclined to conduct random checks and inspections.

Investor must be identified

The revisions to the Foreign Investment Laws now require the controlling person or persons of the foreign-invested entity to be identified. The actual controlling person is defined as either the person or persons who 1) collectively have 50% ownership in the foreign investor that will establish the foreign-invested enterprises in China, or 2) the persons who actually control the foreign investor through means other than ownership (e.g., control over the decision making).

Read more information about the updated investment approval procedures for foreign-invested enterprises in the report in the download section.

If you have any questions about exporting to China, please get in touch with our S-GE Senior Consultant for China, Daniel Bont, or participate in a country consulting. Register now for a Free consultation event

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