Company establishment – China
We guide clients on the establishment of entities in the PRC including a wholly foreign owned enterprise, joint venture and representative office
We draft and finalise the relevant application documents in Chinese with an English translation (if required) and will arrange for them to be signed by you, filed and registered in the PRC.
For further details on the establishment of a foreign invested enterprise (FIE) in the PRC, please click here for a copy of our note on “Setting up in China”.
General approvals for setting up a foreign invested enterprise in China
For establishing a foreign invested enterprise (“FIE”) in China, the main approval which would need to be obtained is the approval from the Ministry of Commerce (“MOFCOM”), either at the central government level or its provincial or local counterpart level depending on the industry sector involved and the amount that is being invested in the industry.
The National Development and Reform Commission of China (“NDRC”) and MOFCOM has issued the Catalogue for Guidance of Foreign Investment Industry 2011 (“Catalogue”) which groups industry sectors into the four categories of “encouraged”, “permitted”, “restricted” and “prohibited”.
Industries in the “encouraged” or “permitted” categories where the total investment amount (i.e. the total startup debt (shareholder loan) and equity (registered capital) contribution to the foreign invested enterprise at its establishment) is below US$300 million, or industries in the “restricted” category where the total investment amount is below US$50 million, would normally require approval from the provincial or local MOFCOM level only, whereas other business which do not fulfill the above criteria would require approval from the central MOFCOM. In general, there is a perception that the central MOFCOM is more conservative in granting approvals due to its national prominence and is less accommodating than its provincial or local counterparts due to its high caseload.
There are no detailed criteria set out in PRC laws and regulations for MOFCOM to approve or reject the establishment of a foreign invested enterprise, but in principle, MOFCOM approval can be expected to be granted without incident as long as all paperwork are in order and investment in the relevant industry is not “restricted”. MOFCOM may impose certain conditions and require amendments to submitted documents prior to granting approval.
Generally, for establishment of a wholly foreign owned enterprise (WOFE) or sino-foreign equity joint ventures, MOFCOM is required to either reject or issue a certificate of approval within 90 days of receiving a completed application (from the time MOFCOM formally acknowledges receipt without identifying faults), whereas, for establishment of a sino-foreign co-operative joint venture (CJV), the application should be rejected or the certificate of approval issued within 45 days from receiving the completed application.
Other than MOFCOM approvals, other approvals may be required. For example, a project application report would need to be submitted to the NDRC for pre-approval of large projects (e.g. where total investment amount is above US$10,000 for “encouraged” or “permitted” industry categories), and subsequently to the State Council (the cabinet of China) for final approval. Certain regulated industries would also require specific approvals from applicable ministries or commissions, for example, establishment of banking and financing or brokerage businesses would require approval from the China Banking Regulatory Commission; or establishment of insurance and insurance brokerage businesses would require approval from the China Insurance Regulatory Commission etc.
Following establishment, the FIE would be required to be registered with the following bodies in the first month of establishment:
- State Administration of Industry of Commerce (SAIC) for issuance of business licence
- State Administration of Foreign Exchange (SAFE) for opening of foreign currency account and receive investment amount for conversion into RMB
- State Administration of Taxation (SAT) to obtain tax registration certificate
- General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) for obtaining an organisation code certificate