Investment Laws in China

China has gradually set up a legal system in order to create a healthy investment environment and to encourage overseas firms to invest in China.

The law has been formed keeping in mind the interest of the both domestic and foreign investors. The main laws or regulation includes 3 basic laws- The Law of People’s Republic of China on China-Foreign Contractual Joint Ventures, The Law of People’s Republic of China on China-Foreign Equity Joint Ventures, The Law of People’s Republic of China on Wholly Foreign-Owned Enterprises.

A developing country like China is attractive for setting up of big projects by the foreign investors which is not only beneficial to the investor but also crucial for the country’s own development or capital creation. Investments directly into the industries by foreign investors are known as Foreign Direct Investment or FDI. According to prevalent rule in China any Foreign Direct Investment into industries are a subject to project-by- project examination which requires the project to be approved by the concerned departments such as planning department or technological renovation administration who conducts a feasibility study of the project.

Once the project gets approval and found out feasible, the investors need to sign legal documents, contracts and articles of corporation of the enterprise. Once the documents are submitted to the Examination and Ratification Department, an Approval certificate for Enterprise with Foreign Investment is generated subject to the approval of Foreign Trade and Economic Cooperation. Once the approval certificate is received the investors can precede with the registration formalities.

FDI is encouraged in new agriculture technologies, energy resources, communication, new and high end technologies, projects which fetch foreign currency. Any project which might endanger the state’s security or the natural environment or agaist the public interest is prohibited.

One major reason of encouraging FDI in the country is to import high end foreign technologies; China government has issued a series of favourable policies to ensure participation of foreign companies with sophisticated technical background. Benefits like Impost duty exemption, Business tax exemption are given to companies falling under specific categories.

Chinese Government has kept on modifying its Investment Laws keeping in mind the interest of both domestic and foreign investors. The current laws ensure full support to not only Foreign Direct Investment but also to Foreign Institutional Investors investing in the capital market.