1. Prepare to invest in China
If your company is ready for investing in the country, you must know the regional market situation and learn about investment policies implemented by the Chinese government. Officials have divided its industrial projects for investments into four categories classified as encouraged, permitted, restricted and prohibited, which are indicated in the Industry Category Guide for Foreign Investors. The scale of the investment is worth noting. For large investment projects of USD 30 million or above, the approval authority rests on the central government (State Council ministries); for projects under USD 30 million, in the unrestricted category or quota free, or license free, the approval authority goes to local government departments.
2. Find responsible authorities
The State Development and Reform Commission and the Ministry of Commerce are responsible for the review and approval of projects with total investment of USD 30 million or above or other projects that require special approvals.
However, local development offices and commercial departments of the Provinces, Autonomous Regions, Municipalities are responsible for reviews and approvals of the following projects: Projects with total investment under USD 30 million and in the unrestricted category; Projects under USD 30 million, but in the restricted category which must be filed with the State Council ministries or upper level offices; Projects involving quota issues or license matters must go through applications to the departments of the Ministry of Commerce for consent.
Projects with USD 30 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 a project setup
* For joint ventures with equity or contractual partners
Project Proposal Feasibility Study Contract Articles of Association Certificate of approval Business License
How many steps?
First step: Prepare and apply for a 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 register the joint venture to protect the company’s name and trademark.
Second step: Prepare and apply for feasibility study
Once the first step is completed, you and your Chinese partner must work jointly on a feasibility study, which involves markets, capital, planned site, craftsmanship, technology, facilities, environment protections, raw material sales and purchases, economic yielding, proportion of local currency and foreign currency injection, and infrastructure to be submitted to the State or local Development and Reform department, or the Technological Renovation department for examination and approval. Both you and your Chinese partner can discuss and sign a contract and other legal documents such as articles of associations.
Third step: Obtain certificate of approval
After the feasibility study is approved, you can submit the signed contract and articles of associations to the Ministry of Commerce or local trade and economic bureaus for examination and approval. Once approval is granted, a certificate for the joint venture is issued.
Fourth step: Apply for business license
Starting from the date of receiving the certificate of approval, 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 the country, which is 100% owned by yourself or by your company, you can entrust a qualified agency to fulfill all procedures for the application and approval of a foreign enterprise in the nation. Procedures are simple: Fill out application form for setting up a foreign enterprise; Submit articles of association and relevant legal documents to local trade and economic department. Observed by the rules on Foreign Invested Enterprises, the local authority office would grant (or not grant) an approval. If granted, the local authority will issue a certificate. The registration and license go through procedures with the certificate. When a business license is received, you must go through relevant registrations, such as opening up a bank account for Chinese and foreign currencies, tax registrations, customs registrations, foreign currency registrations, business inspections and recruitment procedures.
4. How about investment environment in China?
Since 1979, the Law on Chinese-Foreign Equity Joint Ventures was introduced in the country, to utilize foreign investments as important for opening up to the outside world.
Over the past 24 years, the Chinese macro economic environment provided realistic guarantees and broad prospects for foreign investments. The national economy in the early period, increased by double digits growth rates, in the later period of the 1990s, the growth pattern still reached 78% annually. 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.
Local facilities have been upgraded. Infrastructure construction, such as transportation, telecommunications, water, electricity and gas supply have been renovated.
Along with favorable production management conditions, the soft environment for easy access to investment requirements has been amended. One-stop services for examinations and approvals have been introduced in many local government organizations: offices of different functional departments are working together to speed up procedures. Regulations were reinforced to adapt to a more comfortable legal environment. Since China's access to the WTO, commitments to the WTO entry, opening up of industries had become more important.
5. How many investment forms are available in China?
What investment forms are available in China? Which form is suitable for you or your company? If you read carefully, you can make the right choice. The absorption of foreign capital are divided into direct investments, foreign Government Loans, UN organizations and other sources. Direct investment forms, which are popularly operating in the country, 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.
6. Any legal aspects to comply with?
To improve the legal environment and to create a unified, consistent, pragmatic and feasible investment environment, the legal system is geared to open, just and transparent principles. Since 1979, the legal framework has been structured to constitute a sophisticated legal system.
7. Try to enjoy maximum privileges and preferences
If you or your company decides to invest in China, then learn as much as you can about preferential policies available in the country.
China has provided many preferential policies to stimulate overseas investments, such as infrastructure facilities, apart from preferential terms; you can expand your business scope to promote economic development in the central and western regions of the country. Geographical policies have been introduced that apply to different regions. Tax and Tariff preferences are issues companies should be most concerned with. For foreign invested companies, taxes may include the corporate income tax, personal income tax, turnover taxes (value-added tax, consumption tax and business tax), land tax, stamp duty, vehicle and vessel tax, and urban real estate tax.; for imports and exports, tariffs and import-stage value-added taxes may be involved.
8. Where to invest?
Along with China's opening door policies that were adopted in 1979, the opening zones with different orientations and functions were extended down to various regions which include special economic zones (Shenzhen, Zhuhai, Xianmen, Shantou and New Area of Pudong in Shanghai), national economic & technological development zones (ETDZ), national free trade zones (FTZ), national hitech 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 can conduct research and lock into a particular zone.
