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Question 1: What are the preferential policies for foreign-invested enterprises, especially the enterprises for export processing? Why can China attract so many foreign investors? |
Answer: Foreign firms invest in China primarily for the following reasons:
i.The good development trend of Chinese economy provides a huge development space for foreign investments. In the circumstances that the global economy grows slowly and the economies of developed countries such as the US and Japan remain sluggish, Chinese government adheres to the guideline of expanding the internal demand, continues to implement the positive financial policy and steady monetary policy, and accelerates the adjustment of the economic structure. In the meantime, by further expanding the opening to the outside world and by actively and steadily promoting the reforms in accordance with China's situation and the laws of market economy, China has continuously improved the overall quality and benefit of the economic running, thus maintaining a strong momentum of growth.
ii.Stable political situation. Encouraging foreign investments is an important part of China's basic policy. For a long period of time, Chinese government has consistently paid much attention to and welcome foreign investments in China and has made unremitting efforts in improving investment environment and in protecting the legal rights and interests of foreign investors.
iii.Broad market potential. With China's economy on continuously fast growing, the potential of domestic market is enormous. Thanks to China's stable politic environment, fast economic growth (the GDP rose by 7.9% from January to September this year), high-quality and low-cost labor force, complete set of industries, good return on investment, etc, China exhibits strong attractiveness to numerous foreign firms, including multinational ones, under the current circumstances of accelerated adjustment of industrial structure worldwide.
iv.Advantages in work force, such as a big number of skillful workers, technicians, and managers. These advantages will exist for a long time, thereby attracting multinational companies to transfer their production and processing bases to China continuously.
v.Foreign firms' experience of successful investments in China during the past twenty years of China's reform and opening strengthens foreign investors' confidence in investing in China and makes China the first choice of places for foreign investors to invest in.
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Question 2: What is the role that foreign-invested enterprises play in the development of China's national economy? |
Answer: Absorbing foreign investments not only makes up for the lack of China's construction capitals, but also introduces a lot of advanced and applicable technologies and experiences, impels the advancement of Chinese open economy, accelerates the growing of our country's high- and new-tech industries, and facilitates the establishment and improvement of our socialist market economy. Foreign-invested enterprises have created volumes of employment chances, and have fostered a big number of talents. Presently, foreign-invested enterprises directly employ 23 million peoples, accounting for 10% of the total labor population in the cities and towns. Foreign investments have helped the country increase the taxes and foreign exchange incomes, thereby enhancing the competitiveness of Chinese economy as well as the country's overall strength. During January to September of 2002, the incremental industrial value produced by foreign-invested enterprises amounted to 576.6 billion yuan, increasing by 12.7% over the value in the same period of last year and accounting for 25.64% of the whole country's incremental industrial value. During January to September of 2002, the taxes paid by foreign-invested enterprises amounted to 255.446 billion yuan, increasing by 17.12% over the taxes in the same period of last year and accounting for 25.64% of the whole country's taxes income. Therefore, foreign-invested enterprises have become an undividable part and a new growth source of the country's national economy, and have made significant contributions to the rapid, sustainable, stable development of our economy.
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Question 3: Hi, our company is currently a distributor for a high-end Italian tie make. We import finished products from Italy. I would like to make a query about the import duty rate on this type of product? How is it calculated? It is levied based on the declared value or by a fixed reference value that the Customs applies on its own? |
Answer: Thank you for the question. First, to know about the import duty rate, you have to know the customs code for the product youre importing. Then you may log on to the Whole Customs Info Network (http://china-customs.com) where you may do a search in the latest (2005) Catalogue on Chinese Customs Tariffs and Rates and find a match. Second, pursuant to Article 36 of the Import and Export Tariff Regulations of the PRC (State Council Decree No.392), the tariffs of import commodities are levied ad valorem, or specifically or by other means stipulated by the state. The formula for calculating the ad valorem duty is payable duty=dutiable price tariff rate. The formula for calculating specific duty is payable duty=volume of commodities duty amount per unit. As for more specifics, please consult local entry-exit customs
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Question 4: When registering a foreign trading company, is there any requirement on the registered capital? |
Answer: When registering a foreign trading company, the registered capital has to meet relevant provisions in China 's Company Law, which stipulates that for a production-based company, the registered capital of the company should be no less than 500,000 RMB. For a commodity wholesaling-based company, the minimum requirement is 500,000 RMB as well. For a commodity retailing-based company, the figure is 300,000 RMB.
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Question 5: What is the progress that China has made in its opening to the outside world in the commercial field? |
Answer: China has so far approved 46 retail joint ventures and one wholesale joint venture. In light of the commitments that China made for its accession to WTO, the competent authority is formulating the new "Provisional Methods for Management of Foreign-invested Commercial Enterprises" with the aim to further expand the opening of the commodity circulation field. The methods primarily involve the following contents:
i.The experimentation of commercial field's utilizing foreign investments will be shifted to normalized opening. On the basis of "Experimental Methods for Foreign-invested Commercial Enterprises" currently in effect, the "Provisional Methods for Management of Foreign-invested Commercial Enterprises" will be formulated.
ii.Expanding the scope of the opening with the focuses on chain operation and commercial distribution.
iii.Accelerating drawing up business development planning.
iv.Loosing the conditions for establishing foreign-invested commercial enterprises.
v.Permitting foreign enterprises to participate in the reorganization of domestic commercial businesses, especially the state-owned ones.
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Question 6: Hi, my company is a foreign investment company with limited liabilities. I'd like to know if I could change the nature of my company to a foreign investment stock company. How shall I do that? Thank you! |
Answer: Article 13 of the Provisions on Foreign Investment in Establishing Holding Companies (MOFCOM [2004] Decree No.2) stipulates, a holding company may set up a foreign invested stock company as a sponsor. After the sponsors of the stock company reach an agreement to set up the company, they may collectively entrust one sponsor to proceed with the application. The procedure for this is articulated in the Interim Provisions on Issues Related to the Establishment of Foreign Invested Stock Companies
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Question 7: Our company is Hong Kong-based with no rep office or branch operation in the mainland. Were intending to engage in import and export trade in the mainland. Id like to know about the difference of business scope between a rep office and a branch operation. Is there any restriction as to the foreign exchange remitted offshore from the establishment? |
Answer: Hi, Mr. Huang. By branch operation, were you referring to a rep office or a branch company? The establishment set up by a foreign firm in China is in two types, one is a rep office, which is a not-for-profit organization, and the other is a branch company, which is charged with certain business functions. According to Article 3 of the Administrative Measures on the Registration of Resident Representations of Foreign Companies, a resident representation of a foreign company should be one that is indirectly involved in operating activities. However, if there's already an agreement between two governments, then the agreement takes precedence. On your second question, upon consultation with the State Administration for Foreign Exchange, for a not-for-profit rep office whose costs are covered by its parent company, the money can be returned (remitted overseas) if not used up. For a branch company whose foreign exchange comes from its operating activities, the money has to be administered by relevant state provisions on foreign exchange.
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Question 8: Id like to know whether a foreign invested coal mining company has ever been approved in China. Which government agency is the competent authority governing coal related issues that the State Council indicates in Chinas Coal Law. |
Answer: According to the White Paper published by the information office of the State Council in 2004 entitled China's Policy on Mineral Resources, after the 1998 government reshuffling, the management functions on mineral resources were transferred from the former State Development and Planning Commission and relevant coal and metallurgy authorities to the Ministry of Land and Resources. As a result, mineral resources are now administered by one single authority in China . If you have further queries, please direct them to the Ministry of Land and Resources (Tel: 010-66559001).
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Question 9: I'd like to know when setting up a wholly foreign-owned wholesale company, if the company being applied for has already been initially approved by the local government, how long does it take for the application to be approved by the Ministry of Commerce. What is the procedure? To which department within MOFCOM should the application be made? Thank you. |
Answer: Administrative Measures on Foreign Investment in Commercial Fields(MOFCOM Decree [2004] No.8) points out that within 3 months upon receipt of all the application documents, MOFCOM shall make a decision as to whether or not the application has been approved. For an affirmative decision, an approval certificate will be issued for the FIE. In the case of a denied application, justifications will be made.
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Question 10: We are a Sino-foreign consultant joint venture. We want to add to the business scope consultation and marketing of tobacco. Can we do that? If so what procedure should we follow?
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Answer : Companies wishing to enlarge their business scope should make application to the local original approving authority to add to their business scope, then change their business license in the local industry & commerce administration where the company is registered. For more details please consult local department in charge of foreign trade and economic cooperation. |
Question 11. How to define foreign enterprises of a special type or industry that shall be examined and approved by the Ministry of Commerce under Article 10 of the Stipulations about Merger and Division of Foreign-funded Enterprises? Are there any relevant provisions? 2. How to define factors involving in key industry and having or may affect state economic safety, in Article 12 of the Stipulations? 3. Does an investment company fall under the scopes of the above two? |
Answer: According to the Interim Administrative Methods for Examination and Approval of Foreign-invested Projects, the State Development Planning Commission shall be reponsible for the approval of encouraged projects with over (including) US$100 million investment, and allowed foreign-invested projects and restrictive foreign-funded projects with a total investment of over (including) US$50 million, for the Ministry of Commerce to examine and approve. Of those, encouraged projects with over (including) US$100 million investment, and allowed foreign-invested projects with a total investment of over (including) US$50 million, shall be submitted to the State Council for approval by the State Development Planning Commission and the Ministry of Commerce.
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Question 12: A foreign-invested or joint-ventured enterprise in China, has over 25% of stake in a joint venture it set up with another company in China. Is it still a foreign-funded enterprise? Thanks for your reply. |
Answer: Please refer to Stipulations about Merger and Division of Foreign-funded Enterprises (revised in 2001), or Interim Stipulations about Investment of Foreign Enterprises in Domestic Enterprises |
Question 13: I work for a foreign-funded enterprise in Changsha. Can you tell me what formalities should a foreign-funded enterprise focusing in sales and production go through to engage in internal trade of other products? What are the stipulations about the establishment of a separate foreign-invested trading company? Thank you. |
Answer: If a foreign-funded non-commercial enterprise is to expand the business scope of distribution, the investor shall revise corporate contract, rules, and fill in the application forms according to laws and regulations, submit the application to departments in charge according to procedures about the expansion of corporate business scope for exmination and approval. For details, pleasae refer to the Notice about Relevant Legal Procedures of the Ministry of Commerce about Foreign-funded Non-commercial Enterprises Expansion of Distribution Business Scope (No. 9, Shangzihan 2005). Plus, please refer to the stipulations of the Administrative Methods for Foreign Investment in the Commercial Sector (Decree no.8 of the Ministry of Commerce, 2004) in going through formalities for the establishment of a foreign-invested trading company.
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Question 14: Is it that becoming a premier international cargo agent must be approved by the Ministry of Commerce? Do we need the certificates of international cargo agent granted by the Ministry of Commerce? How to differentiate premier agent from secondary agents? Thank you. |
Answer: International cargo transportation agents and their subsidiaries legally registered at state administrations of industry and commerce shall go through record formalities at the Ministry of Commerce, or organs entrusted by the former. Different record forms are used with the above two entities. For details, please see (Interim) Methods for Recordable of International Cargo Agent Enterprises (Decree No. 9 of the Ministry of Commerce, 2005) |
Question 15 I want to know what formalities shall foreigners go through in running a foreign trade company (having the right to operate in import and export) in China, and which department to go to for consulting service? Thank you |
Answer: Please specify the business scope of the company. If it deals in import and export only, with no domestic sales, you can go through formalities as is stipulated in the Interim Methods for the Establishment of Sino-foreign Foreign Trade Companies. |
Question 16: Are foreign investors allowed to set up solely-funded (Taiwan) credit guarantee company, or must the latter be a joint venture? 2. What specific materials should be prepared? 3. Are there any stipulations of the Ministry of Commerce about foreign credit guarantee company? |
Answer: yes it is allowed, for the detail please contact with Sino-Tone Consultant for the further document requirements. |
Question17: WE are a S. Korean enterprise and want to invest in China, and get registered as a solely-funded foreign commercial wholesale and retail enterprise in Beijing Bonded Zone. Do the latter two differ in any way (in preferential policies and other aspects)? |
Answer: Major functions of Chinas bonded zones are processing, entresol trade, storage and display. Goods imported for export processing, entresol trade, storage and display all enjoy tariff-free treatment in the zone. To support the development of tariff-free zone, such zones also enjoy the following tariff-free policies: production, management equipment and self-use office equipment and a rational number of maintenance parts in the zone, fuel for production, materials and equipment for the construction of factory buildings and warehouse facilities will be free from duty. Foreign enterprises located in non-bonded zones may have more extensive business scope, like setting up business shops and franchised operation. In bonded zones designated by the customs, though goods for export processing are also tariff-free, production, management equipment and self-use office equipment and a rational number of maintenance parts in the zone, fuel for production, materials and equipment for the construction of factory buildings and warehouse facilities, except the country stipulates otherwise, do not enjoy tariff-free treatment the way foreign enterprises in the bonded zone do. For detailed information, please consult Sino-Tone Consultant for the further information |
Question 18: Does foreign enterprises acquisition of domestic share-holding commercial bank need the approval of the Ministry of Commerce? Is the foreign trade department in charge at provincial level entitled to examine and approve it? |
Answer: Please refer to relevant clauses in the Stipulations about Changes in Stock Option of Investors in Foreign Enterprises, and submit an application to the original examination and approval organ. Any further information please contact with Sino-Tone Consultant. |
Question 19: In application for the certificate of foreign investment in commercial sector, the written material submitted didnt require corporate residence, but in handing in the material, some office clerks with the Ministry of Commerce said the item is a must. Is it legal for them to do so? Whats the basis for so doing? |
Answer: In applying for the establishment of foreign-funded commercial enterprise, legal materials like the written application, contract and rules. Written application and rules contain such contents as name of enterprise and residence, business scope, total investment and registered capital. So, the requirement of the department in charge on showing the residence certificate is the normal procedure. |
Question 20: We are a Singapore company. We plan to invest in China. If we set up a foreign enterprise in China, and buy land for that purpose, after the establishment of the company, can user of the certificate of land use right be the Singapore Company? |
Answer: Companies, enterprises, other organizations and individual outside the Chinese territory, unless otherwise stipulated, can obtain land use right in accordance with the Interim Regulations of PRC about Transfer and Selling of Use Right of State-owned Land in Towns and Cities, for land development, utilization and operation. |
Question 21: I want to set up an enterprise, and want to learn about relevant laws and regulations about remitting corporate profits back to my home country. |
Answer: According to the Foreign Exchange Administration Regulations, foreign enterprises terminate pursuant to law shall liquidate in line with state regulations. After tax payment, Ren Min Bi that belong to foreign investors can be used to buy foreign exchange at designated banks to remit to the home countries or take out of the Chinese territory. |
Question 22: WE are a Hong Kong IT company, and plans to set up a research and development center in Beijing, and a sales company. What materials should we submit, is there any restrictions on the registered capital? |
Answer: Establishment of the company should comply with stipulations under the Notice of the Ministry of Foreign Trade and Economic Cooperation on the Issue of Foreign Investors' Establishment of Research and Development Centers , and the Administrative Methods for Foreign Investment in Commercial Sector. |
Question 23: Are there restrictions on red wine import and cigar wholesale? Where to go for what formalities?
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Answer: According to the Administrative Methods of Foreign Investment in Commercial Sector, foreign-invested commercial enterprises engaged in wholesale shall not deal in salt and tobacco. Foreign enterprises engaged in retail shall not deal in tobacco. |
Question 24: Can stock right owned by foreign investment holding companies be transferred to natural persons? 2. Shall stock right transfer be approved by the original examination and approving organ?
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clauses under the Stipulations about Changes in Stock Rights of Investors in Foreign Enterprises, and submit written applications to the original examination and approval organ.
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Question 25: We are a Hong Kong company, and plan to register a real estate development company in Beijing , how much registered capital is needed?
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Answer: According to Corporation Law (revised in 2005), the minimum registered capital of a limited liability company shall be RMB30 thousand. Should laws and administrative regulations have higher demands on the minimum registered capital of a limited liability, the latter should be followed.
The minimum registered capital of a shareholding company is RMB5 million. Should laws and administrative regulations have higher demands on the minimum registered capital of a limited liability, the latter should be followed. |
| Question 26: After winning government project, can importanted materials and spare parts to be used for the project enjoy preferential tariff? If the preferential tariff is there, which departments should we go to for certificates of exemption and reduction of tariff? What documents can be used for reference?
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| Answer: One of the major measures for giving foreign enterpirses preferential tax policies by the Chinese government is the exemption and reduction of tariff and value-added tax of import link for imported equipment. |
| Question 27: How is the examination and approval authorities divided between the Ministry of Commerce and local governments at all levels in terms of the establishment of foreign enterprises?
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Answer: According to the country's laws and regulations, with the establishment of foreign enterprises, the government practices the system of examination, approval and registration by itme. Investment sum and project classification under the Directory of Foreign-Invested Industries serve as major basis for the examination and approval authorities of local and central governments. For details, please refer to the Project Approval and Establishment Examination and Approval Procedures. |
| Question 28: I want to set up an enterprise, and want to learn about relevant laws and regulations about remitting corporate profits back to my home country
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Answer: The attached two regulations are provided here for your reference only. Regulations of the People's Republic of China on the Management of Foreign Exchanges Circular of the People's Bank of China on Issuing the Provisions on the Settlement and Sale of and Payment in Foreign Exchange
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| Question 29: What is the difference between office and brand of a foreign enterprise? Is it true that the country has stipulated that the commerce department will no long examine and approve the establishment of office and brand of a foreign enterprise?
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Answer: The Implementation Proposals about the Issue of Law Application in the Examination, Approval, Registration and Administration of Foreign-fund Companies clearly stipulate: company registration organs will no longer accept the registration of offices of foreign enterprises. With office that has been registered, alternation or postponement formalities will no longer be accepted. On expiration of terms, they should go through cancellation formality or apply for the establishment of a branch as the circumstance may require. Branches of foreign enterprises may engage in such business as liaison and consulting, which is within the company's business scope.
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Question 30: If a branch is to sell the products of the parent company, is it that the branch and the parent company must first have buy and sell relationship?
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Answer: Branch is a concept corresponds to head office or parent company. The business activities of many large enterprises scatters round the the whole country or many countires, directly involved in which is their subsidiaries or affiliations. The latter two are not companies in a real sense, as they don't have the qualification of corporate legal person, or independent legal status. Nor do they assume civil responsibility. So there can't exisit a buy and sell relationship between branch and head office and parent company.
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