Provisions on the Establishment of Investment Companies By Foreign
Investors

20030610  the Ministry of Commerce　

Article 1 In order to promote foreign investors to invest in China,
introduce advanced technologies and management experiences from
abroad, foreign investors are permitted to, in accordance with the
relevant laws and regulations of China on foreign investments as
well as the present Provisions, establish investment companies in
China.

Article 2 An investment company herein means a company established
by a foreign investor in the form of either wholly-owned enterprise
or Sino-foreign joint venture to engage in direct investments. Such
a company shall be in the form of a limited liability company.

Article 3 A foreign investor who intends to establish an investment
company shall meet the following conditions:
(1) It is in good credit status and has necessary economic strength
to establish an investment company, with its total amount of assets
during the year before the application no less than 400 million USD,
and it has established a foreign-invested enterprise inside the
territory of China, with the amount of registered capital it has
actually contributed being USD10m or more, and 3 or more project
proposals thereof on planned investment projects which have been
approved, or; It is in good credit status and has necessary economic
strength to establish an investment company, and has established 10
or more foreign-invested enterprises inside the territory of China
engaged in the production or infrastructure construction, with the
amount of registered capital it has actually contributed being
USD30m or more;
(2) If it establishes an investment company by means of joint
venture, the Chinese investor shall be in good credit status and
have necessary economic strength to establish an investment company,
with its total amount of assets during the year before the
application being no less than RMB100m;
(3) The registered capital of an investment company shall be no less
than USD30m.The foreign investor that applies to establish an
investment company shall be a foreign company or enterprise or
economic organization. If there are two or more foreign investors,
there shall be at least one foreign investor holding major stock
rights who conforms to Item (1) of Paragraph 1 of the present
Article.

Article 4 A foreign investor who meets the conditions prescribed in
Item (1) of Paragraph 1 of Article 3 of the present Provisions may
invest to establish an investment company in the name of its
wholly-owned subsidiary company.
Article 5 If a foreign investor that applies to establish an
investment company meets the conditions prescribed in Item (1) of
Paragraph 1 of Article 3 of the present Provisions, it must issue a
letter of warranty to the approval organ, guaranteeing the
contribution by the established investment company of the registered
capital when investing inside the territory of China and the
technology transfer of the said foreign investor or associated
company. If a foreign investor invests to establish an investment
company in the name of its wholly-owned subsidiary company, the
parent company must issue a letter of warranty to the approval
organ, guaranteeing the contribution by the subsidiary company of
the registered capital of the established investment company
according to the conditions approved by the approval organ, and
guaranteeing the contribution by the investment company of the
registered capital when investing inside the territory of China and
the technology transfer of the parent company and its subsidiaries.
Article 6 An investor shall, when applying to establish an
investment company, submit the following documents to the department
of foreign trade and economic cooperation of the province,
autonomous region, municipality directly under the Central
Government, municipality separately listed on the State plan where
the investment company under planned establishment is located for
verification and consent, and then submit them to the Ministry of
Commerce for examination and approval.
(1) In the case of establishing a joint venture, a project proposal
on the establishment of a joint venture investment company, a
feasibility study report, contracts and articles of association
signed by all parties to the investment;In the case of establishing
a wholly-owned investment company, a project proposal signed by the
foreign investor, the wholly foreign-owned enterprise application
form, feasibility study report and articles of association;
(2) The certification documents of credit status, certification
documents of registration (photocopies) and certification documents
of the legal representative (photocopies) of all parties to the
investment;
(3) The approval certificate (photocopy) and business license
(photocopy) of the enterprise invested by the foreign investor and
the capital verification report (photocopy) issued by Chinese CPA;
(4) The balance sheets of all parties to the investment in the
latest three years which have been lawfully audited;
(5) The letter of warranty to be submitted as required by Article 5
of the present Provisions;
(6) Other documents required by the Ministry of Commerce. All the
above-mentioned documents shall be formal documents unless it is
indicated to be a photocopy. If the documents are not signed by a
legal representative, a power of attorney by the legal
representative shall be presented. If a lawfully established
intermediary institution is authorized to file the application, a
power of attorney signed by the legal representative of the investor
shall be presented.
Article 7 A foreign investor must use a convertible currency or the
Renminbi proceeds it obtains inside the territory of China or the
lawful Renminbi proceeds it obtains due to share transfer or
liquidation, etc. as the registered capital it contributes to the
investment company. A Chinese investor may invest in Renminbi. If a
foreign investor uses its lawful Renminbi proceeds as the registered
capital and contributes to the investment company, it shall submit
the relevant certification documents and the tax payment receipts.
The investments shall be fully contributed within two years as of
the day when the business license is issued.
Article 8 In the registered capital of an investment company, there
shall be at least USD30m which should be regarded as investments to
the newly established foreign-invested enterprise, or be regarded as
the incompletely contributed amount of investments to the
foreign-invested enterprise invested and established by the parent
company or associated company (with the formalities of stock right
transfer having been lawfully finalized), or the increased part of
investments, or be used to purchase the stock rights of a
shareholder of a domestic company inside the territory of China.
Article 9 If the registered capital of an investment company is no
less than USD30m, the amount of loans shall be no more than 4 times
of the contributed amount of registered capital. If the registered
capital of an investment company is no less than USD100m, the amount
of loans shall be no more than 6 times of the contributed amount of
registered capital. If the amount of loans for the investment
company is planned to exceed the above limit due to the needs in
operation, it shall report to the Ministry of Commerce for approval.

Article 10 An investment company may, after being approved by the
Ministry of Commerce to be established, run the following business
on the basis of its actual needs in undertaking the business
activities in China:
(1) Investing in accordance with the law in the areas where foreign
investments are permitted by the state.
(2) Being entrusted in writing by an enterprise it invests in
(unanimously adopted by the board of directors) to provide the
enterprise with the following services: a. Assisting or representing
the said enterprise in purchasing machinery equipment, office
equipment and raw materials, components and parts needed in
production for the enterprise own use from both home and abroad, as
well as in selling products manufactured by the said enterprise in
both domestic and overseas markets, and providing after-sale
service; b. Balancing foreign exchanges between the enterprise it
invests in upon the consent and under the supervision of the foreign
exchange department; c. Providing the enterprise it invests in with
such services as technical supports in the process of production,
sale and market development, trainings for employees, and
intra-enterprise personnel management, etc.; d. Assisting the
enterprise it invests in to seek loans, and providing them with
guaranty.
(3) Establishing scientific research and development centers or
offices inside the territory of China, engaging in research and
development of new products and hi-techs, transferring its research
and development achievements, and providing corresponding technical
services.
(4) Providing its investors with consulting services, and providing
its associated companies with such consulting services including
market information related to investment and investment policies,
etc.
Article 11 An enterprise herein invested by an investment company
means an enterprise meeting the following conditions:
(1) An enterprise invested by an investment company either directly
or jointly with any other foreign investor and/or Chinese investor,
with the proportion of the converted sole investment of the foreign
investor of the investment company or the converted joint investment
with other foreign investors to the registered capital of the
invested enterprise at 25% or more;
(2) The investment company purchases part or all of the stock rights
of the enterprise invested and established inside the territory of
China by its investor or associated company and other foreign
investors, thus causing the proportion of the converted sole
investment of the foreign investor of the investment company or the
converted joint investment with other foreign investors to the
registered capital of the invested enterprise to reach 25% or more;
(3) The investment company investment amount shall be no less than
10% of the registered capital of the enterprise it invests and
establishes.
Article 12 An investment company may, upon approval by the People
Bank of China, provide financial supports to the enterprise it
invests in and establishes.
Article 13 An investment company may act as an initiator to initiate
the establishment of a foreign-invested share limited company or to
hold the unlisted corporate shares of the foreign-invested share
limited company. The investment company may also hold the unlisted
corporate shares of other share limited company inside the territory
in accordance with the relevant provisions of the state. The
investment company shall be regarded as an overseas initiator or
shareholder of the share limited company.
Article 14 If an established investment company runs its business in
accordance with the law and has no record of violation of law, and
its registered capital is contributed in time as prescribed in the
articles of association, and the amount of the registered capital
actually contributed by the investor is no less than USD30m and has
been used as investment of the enterprise it invests in, the
investment company shall, after obtaining the consent of the
department of foreign trade and economic cooperation province,
autonomous region, municipality directly under the Central
Government, city directly under state planning at its locality, file
an application to the Ministry of Commerce, and may, if being
approved, run the following business on the basis of its actual
needs in undertaking business activities in China:
(1) Being entrusted in writing by an enterprise it invests
(unanimously adopted by the board of directors) to carry out the
following business: a. Selling the products manufactured by the
enterprise it invests in by means of distribution in both domestic
and foreign markets; b. Providing the enterprise it invests in with
such comprehensive services such as transport, storage, etc.
(2) Exporting domestic commodities involving neither export quota
nor permit administration by means of agency, distribution or by
establishing an export purchasing institution;
(3) Purchasing the products manufactured by the enterprise it
invests and then sell them both home and abroad after system
integration; if the products manufactured by the enterprise it
invests in cannot completely satisfy the needs in system
integration, it is permitted to purchase the auxiliary products for
system integration both home and abroad, provided that the value of
the said products shall not exceed 50% of the value of all the
products needed in the system integration;
(4) Providing relevant technical trainings for the domestic
distributors and agents of the products by the enterprise it
invests, and for the domestic companies and enterprises that have
concluded technology transfer agreements with the investment company
or its parent company;
(5) It is permitted to, before the enterprise it invests in starts
production or before the new products of the enterprise it invests
in are put into production, import from its parent company a small
quantity of products which are identical or similar to those
manufactured by the enterprise it invests in but are not under
import quota administration for domestic trial sale for the purpose
of developing the products market;
(6) Providing the enterprise it invests in with services of
operative lease of machines and office equipment;
(7) Providing after-sale service for the products manufactured by
its parent company;
(8) Participating in overseas contract projects undertaken by
Chinese enterprises having the right to run overseas contract
projects in accordance with the relevant provisions of the state.
Article 15 An investment company shall, if importing auxiliary
products for system integration or products for trial sale, go
through the formalities in accordance with the relevant provisions,
and shall use the spot exchange investment in the registered capital
of the investment company, the foreign exchange profits or overseas
foreign exchange loans. The above accumulative imported amount of
each year shall not exceed 35% of the spot exchange investment in
the registered capital of the company. The part of imported amount
in the current year remaining apart from 35% of the spot exchange
investment in the registered capital of the company shall not be
transferred to the next year for use.
Article 16 An investment company shall, if applying for running the
business prescribed in Article 14 of the present Provisions, submit
the following documents to the Ministry of Commerce:
(1) An application letter signed by the legal representative of the
investment company;
(2) The resolution of the investment company board of directors;
(3) The investment company amended articles of association;
(4) The investment company approval certificate (photocopy),
business license (photocopy) and its capital verification report
issued by Chinese CPA;
(5) The capital verification report issued by Chinese CPA on the
enterprise it invests.
Article 17 The duration of an investment company shall be verified
in light of the nature of the project under planned establishment by
the investment company as well as the relevant provisions of the
state on foreign-invested enterprises duration of business
operation.
Article 18 An investment company shall, if investing to establish an
enterprise, separately report for approval according to the scope of
approval and procedures of examination and approval for
foreign-invested enterprises.
Article 19 If an investment company invests to establish an
enterprise, with the proportion of the converted sole investment by
the foreign investor of the investment company or the converted
joint investment with other foreign investors to the registered
capital of the enterprise it invests and establishes at 25% or more,
the invested and established enterprise may enjoy the treatments for
foreign-invested enterprises, and be issued the approval certificate
of foreign-invested enterprise and the business license of
foreign-invested enterprise.
Article 20 An investment company shall, if establishing a branch,
report to the Ministry of Commerce for examination and approval. If
the investment company applies to establish a branch company, it
must meet the following conditions:
(1) Its registered capital has been contributed in good time as
prescribed in the contract and the articles of association, and the
contributed amount of investments is no less than USD30m; or the
investment company has invested and established or has owned 10 or
more foreign-invested enterprises;
(2) The region where the branch company is to be established shall
be a region with concentrative investments of the investment company
or a region with concentrative sale of the products.
Article 21 The investment activities of an investment company inside
the territory of China are not be limited by its registration place.

Article 22 The taxation of investment companies shall be governed by
the relevant laws and regulations of China.
Article 23 An investment company shall earnestly implement its
project investment plans, and shall, within 3 months before the next
year, submit the information on investment and operation of the
first year to the Ministry of Commerce for record in compliance with
the prescribed contents and format. The above-mentioned material
shall be regarded as one of the necessary materials for the
investment company to apply for combined annual inspection.
Article 24 An investment company and the enterprise it invests and
establishes are legal persons or entities independent from each
other, and their business relations shall be treated as those
between independent enterprises.

Article 25 The investment companies and the enterprises they have
invested and established shall abide by the laws, regulations and
rules of China, and may not avoid administration or tax payment by
any means.

Article 26 An investment company may not directly engage in
production activities.

Article 27 The investors of Taiwan, Hong Kong and Macao regions who
invest in the mainland to establish investment companies shall be
subject to quasi governance of the present Provisions.

Article 28 The responsibility to interpret the present Provisions
shall remain with the Ministry of Commerce.

Article 29 The present Provisions shall come into force 30 days
after their promulgation. The Interim Provisions on the
Establishment of Investment Companies by Foreign Investors, the
Interpretation on the Relevant Issues Concerning the Interim
Provisions on the Establishment of Investment Companies by Foreign
Investors, the Supplementary Provisions to the Interim Provisions on
the Establishment of Investment Companies by Foreign Investors, the
Supplementary Provisions to the Interim Provisions on the
Establishment of Investment Companies by Foreign Investors (II), the
Decision on Amending the Interim Provisions on the Establishment of
Investment Companies by Foreign Investors and the Supplementary
Provisions Thereof shall be simultaneously repealed on the date of
entry into force of the present Provisions.