Business Service
Investment Modes in China
Release time:2012-04-21 Browse:
 

Foreign investors may choose the following investment modes in China based on their own strengths, willingness and benefits.

1. Sino-Foreign Joint Venture

It refers to those enterprises which are jointly invested and conducted by foreign companies, enterprises and other economic organizations or individuals and domestic companies, enterprises and other economic organizations or individuals according to the Act on Sino-Foreign Joint Venture Enterprises in PRC. Investors share profits, risks and losses by the proportion of registered capital.

2. Sino-Foreign Cooperative Joint Venture

Chinese enterprises and other economic organizations and foreign enterprises and other economic organizations sign venture contract in territory of China. This joint venture is based on a cooperative joint venture contract where matters the terms of cooperation, division of earnings, ownership of property upon termination of contract, sharing of risks and losses, etc. In an EJV, the distribution of profits has to take place equivalent to the ratio of capital contributions made by parties, while in CJV, it can take place according to the parties’ wishes, thus, CJV is more flexible than EJV.

3. Foreign Capital Enterprises

It refers to those enterprises which are established in China and invested solely by foreign companies, enterprises and other economic organizations or individuals according to the Act on Foreign Capital Enterprises in PRC. All the profits entirely belong to foreign investors.

4. Foreign Investment Stock Co. Ltd

It refers to the companies which are jointly conducted in China by foreign companies, enterprises and other economic organizations or individuals and Chinese companies, enterprises or other economic organizations by subscribing for a certain proportion of stock according to the principle of equality and mutual benefit.

5. Foreign Investment Companies

It refers to the companies which are set up in China by foreign investors in the form of sole proprietorship or joint venture with Chinese investors. Those companies are engaged in direct investment in the form of limited liability companies.

According to Provisions on the Establishment of holding companies by Foreign Investment, No 22, 2004,the Order Of the Ministry Of Commerce Of People’s Republic Of China,the foreign investor shall have a good financial credibility and have a necessary financial capability to set up a holding company with total assets not less than USD 400 million in the year prior to the application. And it shall have set up a foreign-invested company in China with a paid up registered capital over the amount of USD 10 million with more than three projects approved. Or, the foreign investor shall have a good financial credibility and a necessary financial capability to setup a holding company. This investor shall have set up over 10 foreign-invested companies in China with a total paid up registered capital over USD 30 million. This Chinese investor shall have a good financial credibility and a necessary financial capability to set up an investment company, and its total assets shall not be less than RMB 100 million with registered capital over USD 30 million in the year prior to the application.

The following businesses are approved to operate:

(1) Invest in the fields of industry, agriculture, infrastructure, energy that the state encourages and allows;

(2) The investment company may be subject to a written commission (adopted by the board of directors), (3) Provide the following services: (4) Assisted or sale machine equipment, office equipment, raw material, components from home and abroad, including after-sales service; under the supervision of foreign exchange management departments, dealt the balance among foreign-invested enterprises; assist in recruiting and provide technical training, market development and consulting; assist in seeking loans and the provision of guarantees.

6. Financial Institutions with Foreign Capitals of PRC

The financial institutions with foreign capitals stated herein refer to the following financial institutions approved for establishment and operation in China according to the provisions of the related laws and regulations of PRC

(1) The China-headquartered banks with the foreign capitals

(2) The branches of foreign banks in China

(3) The banks jointly invested and operated by the foreign financial institutions along with the domestic companies and enterprises

(4) The China-headquartered financial service companies with foreign capitals

(5) The financial service companies jointly invested and operated by the foreign financial institutions along with the domestic companies and enterprises

If the solely funded banks or financial service companies are to be established, the applicants shall meet the following conditions:

(1) Having a status as the domestic financial institutions;

(2) Having the representative offices which have been operated in China for over 2 years;

(3) Claiming the total assets of no less than USD10 billion at the end of year before the applications are filed;

(4) The financial supervisory systems are well established in the countries or regions where their headquarters are based, and they receive the effective supervisions from the competent authorities of the said countries and regions;

(5) Having obtained approvals from the competent authorities of the said countries and regions;

7. BOT

It means that the investors undertake an industrial program or infrastructure program and are responsible for the construction, operation, maintenance and transfer of the program. In the fixed period of agreement, the investors have access to the equipment and are permitted to retrieve the investment and the charges of operation, maintenance, service and other charges. When the regulated term expires, this program will be transferred to the local government. In China, the BOT mode is employed in the fields of expressways, electric power factories, subways, water treatment facilities and sewage disposal etc in the form of establishing project companies.

8. TOT

Transfer-Operate-Transfer (“TOT”) is where the foreign investor buys the property and operation rights of a facility on terms of contract, like road, power station, and receives his returns through operation and the charges of operation, maintenance, service and other charges. When the regulated term expires, these facilities will be transferred to the local government.

9. Compensation trade

Compensation trade is a form of doing business which integrates technology trade, commodity trade and credit. This means that of foreign investors can provide directly, or on the basis of credit, machinery, equipment and technology for Chinese enterprises on terms of agreement. The Chinese enterprises compensate the foreign investors in installments for cost of equipment and technology with the products manufactured using the equipment and technology provided.

10. Processing and Assemble

Sample processing and component assemble provided by technology support, equipment, spare parts and raw material of foreign investors, products sale by foreign party while the Chinese party take the charges. If equipment provided by foreign party were labeled price, Chinese party would pay by installments.

11. International Leasing

It is a special way of funding to get usage right of foreign advanced equipment by paying lease charge on terms of contract. Enterprise can buy the equipment when regulated term expires. Foreign investor can also provide technology service, raw material, fuel, and spare parts. This program includes selecting and financing the appropriate model for application and professional maintenance for the life of the lease.

12. Buy Stock

Refers to foreign investors and individual, legal person and other organizations in China, Hong Kong, Macao and Taiwan region, as well as Chinese citizens resided in foreign countries and investors with listed stock abided by law buy stocks listed on the Shenzhen or the Shanghai stock exchanges (the two exchanges that have reformed their trading practices) or of newly listed companies.

13. Enterprise property transfer

It refers to transfer based on the law or the behavior for transferring state-owned property. Any foreign legal persons, individual or other organizations have right to accept state-owned enterprise property rights abided according to the provisions of the related laws and regulations of PRC. Meanwhile, the enterprise becomes foreign-invested enjoying the preferential policies by law.

 
Technical Support: Wuxi WangDao