Foreign Direct Investment in the People’s Republic of China

This overview briefly describes the following principal vehicles for foreign investment in the People’s Republic of China (PRC or China): the Sino-foreign equity joint venture enterprise, the Sino-foreign cooperative joint venture enterprise and the wholly foreign owned enterprise. These investment vehicles are collectively referred to as foreign investment enterprises (FIEs). A brief introduction of the new form of vehicle for foreign investment – foreign-invested partnership (FIP), will be set out towards the end of this overview.

Despite the PRC’s continuous efforts in encouraging foreign investment for the past three decades, we wish to emphasise that the legal framework and policies affecting foreign investment in the PRC are still developing and contain certain restrictions and approval requirements. For instance, the Catalogue for Guiding Foreign Investment in Industries updated in 2011 lists specific industries in which foreign investment in China is encouraged, restricted, or prohibited. Such list is subject to review from time to time. The latest revisions to the Company Law of the People’s Republic of China, which entered into effect on 1 March 2014, which is also applicable to FIEs in general, although there may be local variations in implementation. The information in this overview is based upon our experience with, and understanding of, publicly available PRC investment laws as of 1 July 2014.

This overview is not intended as an exhaustive discussion of foreign investment in the PRC, but rather to provide general information for reference purposes on foreign investment policy as well as the major types of investment vehicle. In view of the vigorous and rapid development of the PRC economy and legal framework, for those foreign investors planning to do business in China, especially those first-time investors who are not so familiar with doing business in China, it is highly recommended that professional advice and further information (such as the relevant approval requirements) be sought before embarking on foreign investment to China.

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