The Ministry of Commerce (MOFCOM) recently brought significant changes to current foreign investment regulations, including the removal of minimum capital requirements.
MOFCOM issued Decree No. 2 on 28 October, which amended 29 ministry-level regulations, and abolished minimum capital requirements for China holding companies (CHCs), foreign-invested joint stock companies (FISCs), foreign-invested venture capital enterprises, foreign-invested financial leasing companies, foreign-invested logistics companies and commercial factoring companies.
The rules related to equity capital contribution are also further relaxed. The decree also simplifies the approval processes for strategic foreign investment into listed companies. These changes will encourage investment in the above types of companies, as well as restructuring of existing companies.
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Negative list expansion
The application of the negative list will be expanded to all market players nationwide under the State Council’s Opinions on Implementing Market Entry Negative List Administration issued on 2 October (Circular 55).
A new negative list for market entry, which will apply to both domestic and foreign investments, will be formulated under the opinions. The negative list for market entry will integrate and align with existing administrative approvals and measures that affect market access, as well as the National Development and Reform Commission’s catalogues guiding structural adjustment of industries and verification of investment projects.
Currently, the negative list method is adopted in the four free trade zones in Shanghai, Guangdong, Tianjin and Fujian, and for the screening of foreign investment projects only.
But the State Council opinions may have a wider geographical coverage. This revamped market access system will be adopted in selected pilot regions in the next two years. The practice will be reportedly expanded from coastal regions to inland areas, and a nationwide rollout is planned for 2018.
Freer investment in Beijing
The State Council issued Circular 60 on 15 October, liberalizing foreign investment in three service sectors, as indicated in the following table. This policy is valid in Beijing only, and will remain effective until at least 5 May 2018.
In May this year, Beijing received approval from the State Council to issue pilot policies aiming to open up the service industry for foreign investment. The pilot scheme envisions relaxation for foreign investment in the following areas: (1) science and technology; (2) internet and information services; (3) culture and education; (4) business and travel; (5) financial services; and (6) health and medical services.
In addition to Circular 60, we expect to see further liberalization in other service sectors in Beijing, and possibly on a nationwide basis, in due course, as noted by a MOFCOM official to the state media.
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Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mailing Danian Zhang (Shanghai) at: danian.zhang@bakermckenzie.com
