Some cities and provinces have implemented the regulations for attracting foreign investments following the “Integrated Development of the Yangtze River Delta”. Shanghai, Jiangsu, Zhejiang, and Anhui are promoting various regulations to encourage foreign businesses to flourish, and foreign investors to be enticed in taking part in establishing entities.
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As the said jurisdictions are increasingly becoming China’s top investment destinations, China has extended more proactive measures with new regulations to promote foreign investments in these areas. The Shanghai Administration for Market Regulation (Shanghai AMR), Jiangsu AMR, Zhejiang AMR, and Anhui AMR have jointly made and respectively published three trial measures about foreign-invested enterprises.
New regulations concerning domestic natural persons
Together with foreign natural persons, enterprises, or other organizations, resident People’s Republic of China ID cardholders are permitted to invest in and establish foreign-invested enterprises (FIEs) within Shanghai, Jiangsu, Zhejiang, and Anhui.
Though generally not permitted under the Chinese laws on the national level and in administrative practices, these domestic resident Chinese ID cardholders are thereby allowed to directly establish either new Sino-foreign equity or contractual joint venture enterprises with foreign investors or become direct shareholders of any existing FIEs.
Moreover, the investment can be cash, in-kind, or intellectual property right, or other non-monetary properties that may be measured based on currency and according to the law, may be transferred. The laws governing the foreign-invested enterprises shall still follow the national treatment and the “Negative List” administration.
Simplification of materials for foreign investment registration
These measures implemented for the jurisdictions of Shanghai, Jiangsu, Zhejiang, and Anhui involve simplification of registration materials as well as the implementation of Mutual Recognition of Subject Qualification Evidence Documents.
In normal practice, it usually takes 2-3 weeks for documents to be formalized and notarized for foreign investors. Identification documents need to be notarized by competent company registration authorities or by public notaries. Furthermore, the Chinese embassy or consulate in their home countries must legalize the document as well before becoming acceptable as registration material here in China. In terms of requirements mandatory for foreign investors (i.e., passports of foreign individuals and incorporation certificates), the paperwork involved will be simplified.
Identity requirements of foreign investors who have previously already submitted the same requirements in the form of notarized, legalized, and valid (unexpired) documents for establishing FIEs will no longer be required to submit any new identity documents, as long as these investments were made in any other province or city within the Shanghai, Jiangsu, Zhejiang, and Anhui areas. In other words, foreign investors who wish to establish a new FIE in the four mentioned jurisdictions are no longer required to submit new documents if:
- They have previously established an FIE;
- The location was in any city or province within Shanghai, Jiangsu, Zhejiang, and Anhui;
- They have already submitted identity requirements in the notarized and legalized form to establish the FIE; and
- Those identity requirements are still legitimately within their validity period.
Foreign investors who are not qualified in the previous example but who wish to establish a new FIE are required to provide only one of the following:
- Photocopy of the old identity documents already used for the existing FIEs within Shanghai, Jiangsu, Zhejiang, and Anhui – stamped with the archive stamp of the competent Market Supervision Authority (MSA), or
- Certificate issued by the competent MSA and photocopy of the old identity documents.
These simplifications in documentary requirements will streamline further investments of foreign investors within Shanghai, Jiangsu, Zhejiang, and Anhui territories. Moreover, this measure applies to the changes of Shareholders of foreign-invested enterprises and foreign capital mergers and acquisitions.
Measures on the establishment of sci-tech enterprises by permanent resident foreigners
Sci-tech enterprises are engaged in developing and transferring technologies, technical consultancy, service, and testing, or R&D, production, and distribution of hi-tech products or services.
According to new regulations, foreigners holding a permanent residency in China are permitted to use their PR identity to establish or invest in sci-tech enterprises which eliminates the need to undergo lengthy processes of notarization and legalization of their passports, given that the residency permit is valid and that is within the four territories mentioned above. Moreover, they are encouraged to use their self-owned intellectual properties and proprietary technologies as capital contributions to invest in such enterprises. The industrial sector of these types of enterprises are not subject to the “Negative List” administration and can only exist in the form of limited liability company, partnership, or sole proprietorship.
The above measures are effective until December 31, 2021, and only apply within the jurisdictions of Shanghai, Jiangsu, Zhejiang, and Anhui.
Shanghai’s new regulations to attract foreign investment
Optimization of the business environment
- “One-stop” government service brand is in the works to facilitate the provision of service to both individuals and businesses
- “One form and one window for all applications” for applications for starting a business will be streamlined to be approved within two to three days in an integrated registration service system
Opening bank account
- To alleviate the problem of foreign investors’ difficulty in opening bank accounts from other parts of the world due to COVID-19 travel restrictions, banks in China may allow foreign investors to participate in a video conference call to complete the check confirmation process (instead of visiting the bank in person). However, it is required that Chinese banks strongly recommend that legal representatives must come to the bank in person with their official passport to open the account.
Market access reform in Pudong New Area
- “One integrated Licence” will last until the end of 2022 and will substantially reduce the cost of industry access. 25 permit items will be processed to allow market enterprises to run with one single permit effective nationwide, thereby simplifying the approval and licensing system.
Separation of licenses from permits
- Abolition of record-filing and registration for foreign trade operators
- Implementation of a compliance promise system in granting auction business license optimization of approvals for accreditation of enterprises involved in end-of-life vehicle recycling (dismantling)
- Reducing approval times for qualification accreditation for businesses involved in overseas labor cooperation (from 20 working days to 10)
Conclusion
These new regulations or measures will simplify formalities involving foreign investments and will promote foreign investors to take part in China’s premier investment scene. Despite the difficulties previously faced during COVID-19, China’s economy is thriving because of the encouragements from the governing authorities and the participation of both Chinese and foreign nationals alike. Streamlining the measures in the premiere area of China will pave the way for the rest of the cities to follow suit.
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