Foreign investors in China
can set up WFOEs, joint ventures with Chinese partners, or foreign contractual joint-ventures, in respect with the above-mentioned law and with the improvements which might intervene in the Chinese legislation related to foreign investments
. We remind that if you are interested in registering a company in China
as an entrepreneur from abroad, our company incorporation agents in China
are ready to offer complete information and help, regardless of the business you wish to introduce on the Chinese market. You can also ask for support in registering the company for VAT in China
In order to eliminate business barriers for foreigners interested in accessing certain industries in China
, and to ease the registration process of a firm, the authorities continue to improve the legislation related to foreign investments
. In this sense, entrepreneurs won’t need the business approval issued by the Ministry of Commerce, as they can simply register the company. Likewise, even though state-owned companies cannot be sustained by foreign investments
, the Chinese authorities want to benefit from the innovative technologies offered by foreigners.
The number one destination for foreign investments
According to a report issued by the United Nations Conference on Trade and Development (UNCTAD), China has surpassed the United States and has become the number one destination for foreign investments in 2014. The country is also at the top in the list of economies that are attractive to multinational companies. Many of them have opened branches or subsidiaries in China in recent years.
China’s potential is focused on a few key elements, among which:
- an impressive internal market;
- a fast growing market;
- affordable labor costs for investors;
- the development of new provinces and thus new opportunities for investments.
All of these factors are important contributors to the amount of foreign capital entering the country. However, investing in China can be a little bit complicated for foreign investors who fear the lack of transparency or the language barrier. These can all be put aside with the help of a team of lawyers in China who can help you navigate through any legal or business issue you may encounter.
Investment opportunities in China
The main investment sectors in China are:
- real estate;
- business services;
- wholesale and retail trade.
Some of the most important foreign investments in China come from countries like: Hong Kong, Singapore, Taiwan, Japan, South Korea, USA, Germany and the UK.
The preferred business form is the wholly foreign owner enterprise, as it allows for complete foreign ownership. China has also signed double tax treaties with other countries and bilateral agreements for investments.
Conditions for a foreign company to invest in China
Investments within China made by foreign companies refer to Sino-foreign contractual joint ventures, Sino-foreign equity joint ventures and wholly foreign-owned enterprises (according to the Interim Provisions Concerning the Investment within China of Foreign-invested Enterprises). These have the structure of a limited liability company, according to the Chinese law.
Foreign companies must fulfill the following conditions in order to make investments in China:
• have a paid off registered capital;
• started to make profits;
• conducting business operations in accordance to the local law;
• have no track record of illegal business operations;
• amount of investment within China made by a foreign enterprise does not 50 percent of its net assets;
• the Industrial Catalogue for Foreign Investment and the Interim Provisions for Guiding Foreign Investment should be both consulted before making an investment in China.
• foreign-invested companies shall not make investments in the prohibited fields for foreign investment.
Our law firm in China can help international investors with legal consulting on the matter, in order to check all the needed conditions for a proper investment in China.
New regulations on investment sectors in China
Foreign industries in China are of four types: the encouraged, the restricted, the prohibited and the permitted ones. Different substantial rules (e.g. tax), restrictions and procedural rules will apply to various categories of industries so that an entrepreneur could understand whether the business which will be carried out is encouraged/discouraged by Chinese government. The foreign investor will consequently know which kind of rules and regulations he/she has to comply with.
Generally, the 2015 version of Catalogue of Industries for Foreign Direct Investment highlights a trend according which Chinese market is continuously opening up to foreign companies. In comparison to the 2011 catalogue, the 2015 version emphasizes the fact that the scope of permitted industries has been enlarged. Additionally, the 2015 catalogue also removes 41 industries from the restricted category (such as some mining industries - diamonds, high-aluminum fireclay, barites, phosphorus mines, celestite and szaibelyite, real estate, cross-border transportations).
Other alterations are related to the encouraged industries by Chinese government - more and more foreign entrepreneurs are emboldened to invest in modern agriculture, environment friendly industries, high technology, new cleaning energy industries, modern service industry. Our Chinese attorneys can offer details if you wish, as a foreign investor, to benefit of proper legal assistance when making an investment in China.
The category of prohibited industries usually covers the ones that may affect national policy or public security, such as manufacture of tobacco products, gambling, domestic courier service, on-line publishing and Chinese law consultation service (except for those in relation to the impact of Chinese legal environment).