Foreign investors and multinational enterprises looking to invest in or set up new companies in China should know that entry into the Chinese market is dependent on the country’s strict laws and negative lists. Recently, China has made efforts to ensure
that foreign entrants are treated the same as their Chinese counterparts; however “negative lists” still remain a big constraint for many foreign-invested enterprises (FIEs), who are prohibited from operating or can only operate around restrictions in certain Chinese industries.
So, what should foreign investors know before setting up in China?
The FIEs need to determine the industry they are allowed to invest in based on:
What do these lists mean?
Foreign investors either cannot step foot in industries listed in the negative list under prohibited sectors. In case you’re thinking of investing in one of the ‘restricted industries,’ you need to follow and meet requirements for partnerships, shareholding and other necessities that are stipulated by the list.
To invest in restricted industries, prior government approval is necessary.
The FTZ Negative List is only applicable for geological locations in free-trade zones, whereas the National List applies everywhere else. In a push to increase foreign investments, China has reduced the prohibited and restricted industries from 190 to 37, between 2013 and 2019.
The encouraged catalog, unlike negative lists, welcomes and even provides preferential treatment to foreign businesses in sectors listed on the catalog. Consisting of two sub-catalogs, one is applicable to the whole country, while other is implemented in 22 regions in central, western and northeastern China.
How to use investments lists for setting-up a compliant business in China?
To invest smartly, FIEs need to keep track of all these lists and changing laws and regulations surrounding them. From ownership structure to investment model, foreign entrants need to know about additional documents, certificates, or approval licenses required to set up a legally-compliant business in China.
That’s where we come in. The currently effective lists are open to modifications and changes which can lead to legal and civil complications for businesses who don’t understand Chinese laws. At Business China, we provide these companies expert services ranging from the setting up and formation process
to management, legal and accounting services
For more information and queries, contact us at email@example.com