Foreign-funded investments are welcomed by China government if they meet the criteria of the investment rules and regulations. Foreign investors may take one of the following forms as permitted by the relevant laws and regulations of China to invest and run an enterprise in China.
Incorporation in China
Foreign companies, enterprises, other economic organizations or individuals may establish equity joint ventures together with Chinese companies, enterprises and other economic organizations within the territory of China with the permission of Chinese government. A Chinese-foreign equity joint venture is an enterprise characterized by sharing investment, management, profits, risks and losses. It is a limited liability company with a Chinese legal person status. The proportion of investment for the foreign party in an equity joint venture shall be, in general, not less than 25 percent of its registered capital. The profit and other income which a participant receives as his shares, or interests may be remitted abroad freely, they may also be reinvested within the territory of China.
Foreign companies, enterprises, other economic organizations or individuals may jointly establish contractual joint ventures (or co-operative enterprises) with Chinese companies, enterprises, or other economic organizations with the permission of the Chinese government within the territory of China through enterprise contract made and agreed on by both parties. They are co-operative enterprises in the form of contractual joint venture. The parties to Chinese-foreign co-operative enterprises shall prescribe in their contract through consultation such matters as rights, obligations, sharing of risks and liabilities, the manager of management and the ownership of property at the time of termination of the contractual joint venture. Therefore, the manner of operation for this kind of enterprises differs according to the different proportion of investment contributed by each party. In such a contractual joint venture, the Chinese party usually contributes land use right, labour, site and natural resources and perhaps part of the funds if possible; while the foreign party, in most cases, mainly contributes funds, technology and key equipment.
If the foreign enterprises, other economic organizations or individuals are responsible for all of its capital, wholly or solely foreign-owned enterprises can be established in China in accordance with the relevant Chinese laws. The foreign investor must provide its own funds or equipment and the registered capital of the enterprise must match its operation scale and social economic responsibilities so as to establish a wholly foreign-owned enterprise. In principle, all the products of a wholly foreign-owned enterprise must sell abroad; if part of its products is to sell on the Chinese market, it should be declared while applying for the formation of the enterprise and approval must be obtained beforehand from the relevant authorities.
A foreign enterprise shall apply to the relevant government body if it decides to establish a representative office in China. After approval, the foreign enterprise will be issued a representative office registration certificate and working permit of the representative.