China’s Laws, Rules & Regulations 中国法律法规
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Foreign Partner’s Equity
Co-operative Joint Venture(CJV)
May be set up as a legal entity or as an enterprise having no separate legal person status
Wholly Foreign Owned Enterprise (WFOE)
Legal entity with Limited Liability 100% Not Required Required
Benefits to the China national economy
Legal entity with Limited Liability Normally cannot be less than 25% Required Required
* Conflict of interest: + China Managers strive for operational success (eg. sales) + Head Office expects Return on Investment
Foreign Investment Options
Tax Investment Term Early Termination Governing Law
Corporate Income Tax Depends on industry; usually decided by contract Permitted PRC Law
Corporate Income Tax Submit at time of registration Permitted PRC Law
China’s Political and Legal Environment
1.The political system is stable. But, although the state looks powerful from the outside, it looks less so from within 2. The communist party (CCP) is in transition. They now allows business people, or “capitalists”, to become members. But if the CCP want to keep power, it is going to have to sacrifice Marxism and communism. 3. The legal system is subordinate to the CCP Rule by man not rule by Law. Judges are appointed and promoted by the local party committee and government elite, not by the Ministry of Justice.
Required Required Required
Required if there are changes in the statutory items (industrial/ commercial and tax registrations)
Required Required Required Required Cash, capital goods, industrial property rights, know-how, land use rights Not necessary No minimum export required
Chinese: Land use right
Cash, material objects, land-use rights, industrial property rights, unpatented technology and other property rights Either a Board of Director or a Joint Management Committee is needed No minimum export required Account book must be established and kept in China Profit and loss shared according to contract terms Corporate Income Tax Specified in the contract Permitted PRC Law
Benefits to the China national economy, Export-oriented or utilize Advanced technologies
No strict requirement. Depends on contract
Contract
Articles of Association Standards for Investment
Accounting as separate entity required. Account book must be kept in China
Profit and loss shared according to the ratio in registered capital
After deduction of necessary fees and tax, profit can be repatriated overseas
Ten Golden Business Rules for China
• Assemble the right team, train locals • Know the market and operating environment • China is not one but eight distinctly different markets • Look for multiple points of entry • Observe market developments and changes • “Seek truth from fact” (Business records, statistics, statements etc) • Know how to benefit from the information network and develop allies • Be creative and pragmatic - like driving a car in China. “Grope one’s way, stone by stone, across the river” • Have patience and keep options open -final offers are the first stage of negotiations • Remember: You are in China to make money! *
Forces that Shape the China Market
1) Monitor and understand WTO induced restructuring 2) Exploit opportunities resulting from WTO, especially domestic trading, distribution and opening branch offices 3) Exploit growing disposable income 4) Monitor inland developments and opportunities 5) Concentrate on developing and maintaining competitive strategies (competition from domestic companies is increasing) 6) Culture of Chinese companies changing 7) Improve branding and image building 8) How to deal with skill shortage? (e.g. insurance sector) 9) Attract and keep high-caliber local managers as the competition for them heats up from newcomers and domestic companies Markets with development potential are: Telecom, Chemicals, Machinery, Fast Moving Consumer Goods (FMCG), IT and Services.
China’s Laws, Rules & Regulations
Discussion Questions
• What are the key aspects of China’s political and legal environment? What options are available for foreign investors in preparing their business entry to the China market? • How has China’s accession to the WTO membership created new opportunities and challenges for both Chinese and foreign enterprises? • What are the legal, political and investment risks involved in doing business in China? What are the possible solutions? • Why did China establish the Shanghai Free Trade Zone in 2013? What opportunities and challenges will the Shanghai Free Trade Zone provide for foreign investors?
Байду номын сангаас
Required Required Required Required Cash, Capital goods, Industrial Property rights
Foreign: Advanced technology and equipments must truly suited to the needs of China
Accounting as separate entity required. Account book must be kept in China
Board of Directors Export requirement Accounting
Profit/ Loss Distribution
Required. Decided under contract No minimum export required
Required Required
Export-oriented or utilize Advanced technologies
MOFTEC Approval Project Proposal Feasibility Study SAIC registration Capital Contribution
Trends
- Joint Ventures - Wholly Foreign Owned (WFOE) - Merger and Acquisition
PRODUCTION IN CHINA – AVAILABLE ALTERNATIVES
Equity Joint Venture (EJV) Legal Form
Co-operative Joint Venture(CJV)
May be set up as a legal entity or as an enterprise having no separate legal person status
Wholly Foreign Owned Enterprise (WFOE)
Legal entity with Limited Liability 100% Not Required Required
Benefits to the China national economy
Legal entity with Limited Liability Normally cannot be less than 25% Required Required
* Conflict of interest: + China Managers strive for operational success (eg. sales) + Head Office expects Return on Investment
Foreign Investment Options
Tax Investment Term Early Termination Governing Law
Corporate Income Tax Depends on industry; usually decided by contract Permitted PRC Law
Corporate Income Tax Submit at time of registration Permitted PRC Law
China’s Political and Legal Environment
1.The political system is stable. But, although the state looks powerful from the outside, it looks less so from within 2. The communist party (CCP) is in transition. They now allows business people, or “capitalists”, to become members. But if the CCP want to keep power, it is going to have to sacrifice Marxism and communism. 3. The legal system is subordinate to the CCP Rule by man not rule by Law. Judges are appointed and promoted by the local party committee and government elite, not by the Ministry of Justice.
Required Required Required
Required if there are changes in the statutory items (industrial/ commercial and tax registrations)
Required Required Required Required Cash, capital goods, industrial property rights, know-how, land use rights Not necessary No minimum export required
Chinese: Land use right
Cash, material objects, land-use rights, industrial property rights, unpatented technology and other property rights Either a Board of Director or a Joint Management Committee is needed No minimum export required Account book must be established and kept in China Profit and loss shared according to contract terms Corporate Income Tax Specified in the contract Permitted PRC Law
Benefits to the China national economy, Export-oriented or utilize Advanced technologies
No strict requirement. Depends on contract
Contract
Articles of Association Standards for Investment
Accounting as separate entity required. Account book must be kept in China
Profit and loss shared according to the ratio in registered capital
After deduction of necessary fees and tax, profit can be repatriated overseas
Ten Golden Business Rules for China
• Assemble the right team, train locals • Know the market and operating environment • China is not one but eight distinctly different markets • Look for multiple points of entry • Observe market developments and changes • “Seek truth from fact” (Business records, statistics, statements etc) • Know how to benefit from the information network and develop allies • Be creative and pragmatic - like driving a car in China. “Grope one’s way, stone by stone, across the river” • Have patience and keep options open -final offers are the first stage of negotiations • Remember: You are in China to make money! *
Forces that Shape the China Market
1) Monitor and understand WTO induced restructuring 2) Exploit opportunities resulting from WTO, especially domestic trading, distribution and opening branch offices 3) Exploit growing disposable income 4) Monitor inland developments and opportunities 5) Concentrate on developing and maintaining competitive strategies (competition from domestic companies is increasing) 6) Culture of Chinese companies changing 7) Improve branding and image building 8) How to deal with skill shortage? (e.g. insurance sector) 9) Attract and keep high-caliber local managers as the competition for them heats up from newcomers and domestic companies Markets with development potential are: Telecom, Chemicals, Machinery, Fast Moving Consumer Goods (FMCG), IT and Services.
China’s Laws, Rules & Regulations
Discussion Questions
• What are the key aspects of China’s political and legal environment? What options are available for foreign investors in preparing their business entry to the China market? • How has China’s accession to the WTO membership created new opportunities and challenges for both Chinese and foreign enterprises? • What are the legal, political and investment risks involved in doing business in China? What are the possible solutions? • Why did China establish the Shanghai Free Trade Zone in 2013? What opportunities and challenges will the Shanghai Free Trade Zone provide for foreign investors?
Байду номын сангаас
Required Required Required Required Cash, Capital goods, Industrial Property rights
Foreign: Advanced technology and equipments must truly suited to the needs of China
Accounting as separate entity required. Account book must be kept in China
Board of Directors Export requirement Accounting
Profit/ Loss Distribution
Required. Decided under contract No minimum export required
Required Required
Export-oriented or utilize Advanced technologies
MOFTEC Approval Project Proposal Feasibility Study SAIC registration Capital Contribution
Trends
- Joint Ventures - Wholly Foreign Owned (WFOE) - Merger and Acquisition
PRODUCTION IN CHINA – AVAILABLE ALTERNATIVES
Equity Joint Venture (EJV) Legal Form