Investment Policies & Relevant Regulations

Q1：How many organizations are responsible for the examination and approval of foreign investment projects in Shanghai? What are the detailed regulations?

There are altogether 24 organizations dealing with the examination and approval of foreign investment projects in Shanghai. Shanghai Foreign Investment Commission examines and approves projects with an investment between USD 10 million & USD 30 million as well as projects which do not need the State's overall balance and with an investment over USD 30 million listed in Encouraged Industries. Foreign Economic and Trade Commissions of district-level and of county-level are responsible for examination and approval of foreign investment projects with an investment under USD 10 million. Local municipality can examine and approve projects located in municipal level industrial zones and with a total investment of less than USD 30 million listed in Encouraged Industries. Pudong Administrative Committee and Free Trade Zone administrative Committee are responsible for examination and approval of projects with and investment under USD 30 million.

Q2：How to handle the projects which go beyond the power of the Shanghai Municipal Government?

Manufacturing projects with a total investment of over USD 30 million, which are regarded as Encouraged projects but need the State's overall balance, will be submitted to the authoritative department of the State Council for approval after being examined by the SIC together with related offices.

Q3：How were the laws on foreign invested enterprises modified?

This time modification mainly involves followings:

1. Deleted some contents of the problem in foreign exchange balance that should be solved by foreign invested enterprises themselves. Foreign exchange that foreign enterprises need to buy raw materials and spare parts, to pay wage, interests on capital and dividend on shares may be disbursed by means of buying foreign exchange through bank or be disbursed through foreign exchange account.

2. Deleted the regulations that foreign invested enterprises should buy raw materials and fuel in China first; as same as other domestic enterprises foreign invested enterprises can enjoy enlarged power of purchase.

3. As for exporting duty, the regulations encou4aging export replace that concerned of export duty. After deleting the regulations that foreign invested enterprises must export duty. After deleting the regulations that foreign invested enterprises must export all of or the great part of its products, foreign invested enterprises can enjoy own power of sales as same as other domestic enterprises.

4. Deleted the regulations that foreign invested enterprises should report their manufacturing and managing plans to the administration in charge in order to record these plans.

Modifications mentioned above were made owing to the requirements that foreign invested enterprises can enjoy autonomous rights under the condition of Socialist market Economy.

Q4: What shall be included in the project proposal of a Sino-foreign joint venture?

(1) The Chinese partner: it shall include the name of the Chinese partner, a briefing about its production and business, the legal address, the name and title of the legal person as well as the name of the authoritative bureau (department).

(2) The purpose of cooperation: The emphasis shall be laid on the necessity and the probability of exporting to make profit & introducing technologies.

(3) The foreign partner: it shall include the name of the foreign company, the registered country, the legal address and legal person together with his name, title and nationality.

(4) The business scope and scale: The necessity of the project construction, the demand of the product both at home and abroad, the production as well as sales areas or regions of the product shall be emphasized.

(5) Investment estimation: it refers to the total amount of fixed assets and circulation fund required.

(6) The prospect of investment & the source of capital: it shall include both the ration of investment and ratio of capital formed by both parties.

(7) Production techniques & main equipment: emphasis is laid on the superiority, suitability and reliability of the technology and equipment as well as important technological and economic indexes.

(8) The quantity and source of major raw materials, water, electric power, gas and transport shall be included.

(9) The number, formation and source of labor shall be included.

(10) Economic analysis with emphasis on arrangement of foreign exchange balance shall be included.

(11) Main documents:
a. The agreement contract of cooperation signed by both parties;
b. the credibility investigation of the foreign investors.

Q5: What shall be included in the feasibility study report of a Sino-foreign joint venture?

(1) A brief introduction
a. The name of the joint venture, its legal address, purpose, business scope and scale;
b. The names of each party, their registered countries, their legal addresses, their legal-persons' names, titles and nationalities (the Chinese party shall make known its competent department or bureau);
c. The total investment of the joint venture, its registered capital, and the number & amount of shares (investment of each party, investment proportion of each party, the means of investment and the deadline for the payment of capital);
d. The term for cooperation, the profit allocation and the ratio of sharing loss and damage;
e. The approval certificate of the project proposal;

(2) Arrangement of production and its basis; The demand of the product both at home and abroad, methods of market survey, the capacity of the production equipment used or being used at home and abroad shall be explicitly stated.
(3) Arrangement of the supply of materials and fuel (including energy and transportation) and its basis.
(4) Selection of the project site and its basis.
(5) Selection of technological equipment and technique process and their bases.
(6) Arrangement of organizing production and its basins (including the total number, formation and source of employees, as well as management).
(7) Treatment of environmental pollution, production safety and hygienic measures and their bases.
(8) Construction methods, progress of the construction & The grounds for doing so.
(9) Sources of fund and its basins (including the shares converted from the original factory buildings and equipment).
(10) Arrangement of foreign exchange receipts and payments and its basins.
(11) Comprehensive analysis (including the analyses of economic results, technology, finance and law); Profits of the project and a risky prospect (Or in a sensitive analytic method).

(12) Main documents:
a. A copy (duplicate) of the business license of each party issued by the competent department of its country or regions;
b. Proof of the legal-person of each party;
c. A balance sheet and a loss-and-profit sheet of each party;
d. The survey of both domestic and international markets, the prediction report and the export ratio of product;
e. Comments of the competent department on the site of the project;
f. Comments of the competent department on environmental protection, fire protection, production safety and hygienic measures;
g. Comments of the competent department on the arrangement of foreign exchange;
h. Pre-examination and estimation report of the competent department about the project.

Q6: What shall be included in the contract of a Sino-foreign joint venture?

(1) The general;
(2) Each party of the joint venture;
(3) The establishment of the corporation;
(4) The purpose, scope and scale of production and management;
(5) Total investment and registered capital;
(6) The responsibility of each party;
(7) Technological transfer;
(8) Sales of product;
(9) Board of directors;
(10) Management organization;
(11) Purchase of equipment;
(12) Preparation and construction;
(13) Management of production;
(14) Taxation, finance and audit;
(15) Term for joint venture;
(16) Handling of property after the term of joint-venture expires;
(17) Insurance;
(18) Modification, alteration and termination of the contract;
(19) Responsibility for breaking the contract;
(20) Force majeure;
(21) Suitability for law;
(22) Settlement of disputes;
(23) Wording;
(24) Effect of the contract and others.

Q7: What are the requirements for setting up an investment company?

The applicant in applying for setting up an investment company should conform to the following requirements:

(1) a. The foreign investor should have good credit status and solid financial background for an investment company, with no less than USD400 million of total assets in the previous year. Also, the investor should already have set up foreign invested enterprises within China whose registered capital should exceed USD 10 million, and have three projects whose proposals have already been approved.

Or: b. The foreign investor should have good credit status and solid financial background for an investment company. The investor has already set up over 10 foreign invested enterprises engaged in manufacturing or construction of infrastructural utilities, with its actual paid-in registered capital exceeding USD 30 million;

(2) If the investment company is a joint venture, the Chinese investor should have a good credit status, with solid financial; background and no less than RMB 100 million of total assets;

(3) The registered capital of an investment company should be no less than USD 30 million.

Q8: What qualifications shall a foreign-funded bank have to apply for establishment?

(1) The investor shall be a financial institution;
(2) It shall have a representative office of more than three years' standing in china;
(3) It shall have total assets of over USD 10 billion at the end of the year prior to the application for such establishment.

Q9: What qualifications shall a foreign bank have to apply for the establishment of its branch?

(1) It shall have a representative office of over three years' standing inside China.
(2) It shall have total asset of USD 20 billion or more at the end of the year prior to the application for such establishment;
(3) Its home country or region shall have a sound financial supervising system.

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