China: Significant Regulatory Changes For Foreign Invested Companies In China

Asia Update

 A common concern of foreign investors when considering forming a company in China is the requirement of paid-in capital. The newly effected laws and regulations, amongst other changes, make the concept of paid-in capital history.

This alert outlines recent significant regulatory changes for foreign invested enterprises ("FIEs") in China, which include Wholly Foreign-owned Enterprises ("WFOEs"), Equity Joint Ventures ("EJVs"), and Cooperative Joint Ventures ("EJVs").

Effective as of March 1, 2014, China's law making body and the State Council amended the People's Republic of China Company Law (the "Company Law"), the Implementing Rules for the Laws of the People's Republic of China on Wholly Foreign-owned Enterprises (the "Implementing Rules on WFOEs"), the Implementing Rules for the Laws of the People's Republic of China on Cooperative Sino-foreign Joint Ventures (the "Implementing Rules on CJVs") and the Implementing Rules for the Laws of the People's Republic of China on Equity Sino-foreign Joint Ventures (the "Implementing Rules on EJVs")  (collectively, the "Amendments").Following is a summary of the regulatory changes for FIE's resulting from the Amendments.

  1. From "Paid-in Registered Capital" to "Subscribed Registered Capital"

    The change from"paid-in registered capital" to "subscribed registered capital" is one of the most significant changes in the Amendments. Before the Amendments, FIEs were required to pay-in a fixed amount of registered capital within two years, 15% of which was required to be paid-in within 90 days after the issuance of the business license. Failure to do so could make the FIE subject to a fine, or revocation of business license under several circumstances. Once the registered capital was paid-in, although it could be used for business operations, including paying employees and rents, it could not be remitted back to the shareholders unless the FIE went through a dissolution process. Even though a reduction in the amount of registered capital of an FIE was permitted under the former law, this was often unachievable in practice.  As a result, for some FIEs with large registered capital requirements, these funds basically just sat in Chinese bank accounts and were not utilized for business.

    The Amendmentsabolish thepaid-in registered capital requirement andallowshareholder(s) of an FIE to determine the amount of registered capital and the timing of the capital contributions, which may be necessary to carry out the company's business plan. It is important to note thatthe foregoing change does not apply to 27 kinds of companies, including companies limited by shares established by public offer, foreign-invested banks, financial asset management companies, financial leasing companies, labor dispatch enterprises, etc. (Please refer to Appendix 1 for the complete list.)
  2. Removing the Minimum Registered Capital Requirements

    Before the Amendments, the Company Law, which mainly governs domestic companies, specified the minimum amount of registered capital of a company. Although there was no specified minimum amount of registered capital in the laws and regulations,and the Implementing Rules on WFOEs only stated that the registered capital of a WFOE should match the scale of its business operation, in practice the Chinese authorities used internal guidance to determinethe minimum amount of the registered capital for a particular type of FIE. For example, a simple consulting WFOE in Shanghai was required to have a registered capital no less than RMB100,000 (approximately US$16,000).

    The Amendments abolish the minimum registered capital requirement for domestic companies, and delete the requirement that "the registered capital of a WFOE matches the scale of its business operation." However, it is not clear if the internal guidance regarding the minimum amount of aforementioned registered capital is still applicable, and responses by government authorities have not been consistent. We understand that the Ministry of Commerce will issue a directive in this regard sometime in April 2014. We will keep a close eye on the developments in this area, which will be the subject of a follow-up notice.   

    It should be noted thatif other laws, administrative regulations, and decisions issuedbytheState Council require minimum registered capital, then such provisions shall still apply.(Please refer to Appendix II.)
  3. Removing the Ratio Requirement between Cash Contribution and In-kind Contribution

    Before the Amendments, the Company Law required that shareholders' cash contributions for a company shall not be less than 30% of the registered capital, and the Implementing Rules on WFOEs provided that the capitalized value of industrial property rights or proprietary technology invested by foreign investors shall not exceed 20% of a WFOE's registered capital. With the effectiveness of the Amendments, these provisions were abolished, meaning that the ratio requirement on cash and in-kind contribution is no longer required, and foreign investors may have industrial technology, equipment, or other types of in-kind capital constitute their entire capital contribution to the FIE. That said, there are still some restrictions regarding in-kind contributions, which are: 1) investors are required to prove the value of in-kind contributions to an FIE by providing a verified valuation report issued by a public accountant registered in China; 2) any machines, equipment, or other materials to be contributed to an FIE shall be necessary to the production of the FIE; and 3) relevant ownership certificates of in-kind contributions shall be provided.
  4. Simplifying the Annual Inspection Procedure

    Before the Amendments, the annual inspection that FIEs were required to go through each year was complicated and time consuming as the procedure involved many Chinese authorities (such as Commerce Bureaus, tax bureaus, statistic bureau, and quality supervision bureau), and required an individual representative from the company to go to the AIC where the company is registered in order to submit various required documents in person.  

    An online reporting system was established with the Amendments to replace the annual inspection procedure. Between January 1to June 30 of each year, all companies and other entities, including FIEs, are required to file their annual reports for the preceding year, which should include contributions of shareholders, equity transfer information, business operation information, and change of management officers (the specific contents of which to be specified by the State Council), to the AIC where the company is registered through an online "Enterprise Credit Information System."

    In addition, from March 1, 2014, a new version of business license is available to new companies or existing companies applying for changes in their registration.  Companies with old versions of business licenses have the discretion to apply for the new version.  However, the old version of business license can not be in use after February 28, 2015.
  5. Unchanged Matters

    Although there are significant regulatory changes in the Amendments, certain related matters that require foreign investors' attention have not been changed:
  • A public accountant registered in China is still required to issue an FIE's capital verification report: (1) when a division or merger of a WFOE, or significant transfer of capital of a WFOE,  occurs; and (2) after the investment or terms of cooperation have been contributed by the parties to a CJV or EJV.
  • The increase or reduction of the registered capital of FIEs is still subject to the approval of Commerce Bureaus and registration with the AIC.
  • The requirement on the statutory gap between the total amount of investment and registered capital remains same. FIEs are only allowed to borrow an amount of overseas loans within the statutory gap.


The Amendments grant foreign investors more flexibility and greater efficiency when investing and operating in China. However, as the Amendments were only recently issued, the implementation of the Amendments requires the coordination among various Chinese government authorities, which may lead to inconsistencies. Before further clarification is issued, it is advisable for FIEs to consult with legal counsel and local authorities prior to engaging in any activities for any company related to the Amendments. 



Companies limited by shares established by public offer


Commercial banks


Foreign-invested banks


Financial asset management companies


Trust companies


Financial companies


Financial leasing companies


Auto finance companies


Consumer finance companies


Currency brokerage companies


Village banks


Loan companies


Rural credit cooperatives


Rural mutual cooperatives


Securities companies


Futures companies


Fund management companies


Insurance companies


Special insurance agencies and insurance brokers


Foreign-invested insurance companies


Direct selling enterprises


Foreign labor service cooperation enterprises


Financing guarantee companies


Labor dispatch enterprises




Insurance assets management companies


Small loan companies

APPENDIX II         Examples of FIEs Remaining Subject to Minimum Registered Capital
 (Not Exhaustive)

Company Type

Required Minimum Registered Capital

Foreign invested financing and lease company

USD10 million

Foreign invested investment company

USD30 million

Foreign invested venture company

The investors shall subscribe to a minimum total capital of USD 5 million.

Foreign invested cinema

RMB 6 million

Foreign invested printing company

For a company that is engaged in the printing of publications or printed matters for packaging decorations: RMB10 million;

For a company that is engaged in the printing of other printed matters:  RMB 5 million.

Sino-foreign invested travel agency

RMB 4 million

Foreign-invested international forwarding company

USD 1 million

Sino-foreign invested telecommunication company

For a company that provides basic telecommunications services throughout the country or across different provinces, autonomous regions or municipalities directly under the central government shall be RMB 1 billion, or for a company that provides value-added telecommunications services, shall be RMB 10 million;
For a company that provides basic telecommunications services within a province, autonomous region or municipality directly under the central government shall be RMB 100 million, or for a company that provides value-added telecommunications services, shall be RMB 1 million.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.