Say goodbye to foreign investment approvals - China introduces record-filling administration for foreign invested enterprises
China further facilitates foreign direct investment by fully implementing record-filing nationwide.
Amendments to Foreign Investment Laws
On 03 September 2016, the Standing Committee of the National People's Congress of the Peoples’ Republic of China adopted the amendments to the Wholly Foreign-Owned Enterprise Law, the Sino-Foreign Equity Joint Venture Enterprise Law, the Sino-Foreign Cooperative Joint Venture Enterprise Law and the Law on the Protection of Investments of Taiwan Compatriots (Decision), which will come into effect on 01 October 2016.
Based on the Decision, certain matters relating to the establishment and alterations of the foreign invested enterprises (FIEs) (including their incorporation, division, merger, material changes, business term, join venture contracts, articles of association, etc) will only be subject to record-filing instead of foreign investment approval if the business of the FIEs do not fall under the Negative List, which is to be issued or approved by the State Council.
It is a significant reform of the governmental administration for foreign investment as the national treatment and Negative List administration for the foreign investment have been officially recognized by national laws and its applicable scope was enlarged from limited areas (ie the free trade zones established in Shanghai, Guangdong, Fujian and Tianjin over the past 3 years) to the whole country.
Record filing arrangement
To further implement the Decision, on the same day of the adoption of the Decision, the Ministry of Commerce (MOFCOM) published the consultation draft of the Interim Measures on Record-filing Administration on the Establishment and Alteration of Foreign Invested Enterprises (《外商投资企业设立及变更备案管理暂行办法 (征求意见稿)》, Interim Measures).
A few highlights on the Interim Measures are illustrated in the Q&A table below:
| Questions | Answers |
| Who can apply? |
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| What is the scope for record-filing? |
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| Which authority will be in charge of record-filing? |
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| When and how can the record-filing be carried out? |
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| How long will the record-filing take? |
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| Will there be a document provided proving the record-filing? |
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| What are the consequences for wrongful record-filing? |
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| When will the alteration for an FIE become effective? |
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The deadline for public comments on the Interim Measures is 22 September 2016. If there is no material modification to the Interim Measures, then the above content will apply.
Negative list
As mentioned above, the FIEs involving the industries or limitations in the Negative List are still subject to the approval administration and the Interim Measures and the online record-filing arrangement are not applicable for them.
The current Negative List is based on the Notice of the General Office of the State Council on Issuing the Special Management Measures (Negative List) for Foreign Investment Access in the Pilot Free Trade Zones (《国务院办公厅关于印发自由贸易试验区外商投资准入特别管理措施(负面清单)的通知》) effective as of 08 May 2015, which provides the restricted and prohibited sectors or other all-sector limitations for foreign investment.
It is anticipated that an updated Negative List applicable to the whole country will be issued shortly before 01 October 2016, when the new online record-filing arrangement for FIEs becomes effective.
1 The Interim Measures will not be applicable for the establishment and alteration of investment by service providers from Hong Kong and Macau, which will instead be subject to the Administrative Measures for Record-filing of the Investment in Mainland China by Hong Kong and Macau Service Providers (Trial Implementation) (《港澳服务提供者在内地投资备案管理办法(试行)》) effective on 01 June 2016.
