The Chinese Ministry of Commerce issued a decree introducing
substantial changes to the current Chinese foreign investment
regime on 28 October 2015. The decree primarily focuses on
"foreign-invested enterprises" and includes the lifting
of certain registered capital requirements and investment scale
limitations. As a consequence, foreign investors now enjoy greater
flexibility in structuring capitalisations and equity investments
in China. Companies should check how the changes affect their
business in China. We will of course continue to update you on this
The new decree is primarily based on China's "Company
Law" and amends 29 administrative rules and normative
documents concerning registered capital requirements, capital
contribution installments, and Chinese holding company structures,
among other things.
The minimum registered capital requirements for foreign-owned
enterprises in a number of industries in China have been abolished.
Foreign-invested venture capital firms, freight forwarding agency
enterprises, commercial enterprises which operate retail shops,
financial leasing companies and logistics enterprises no longer
have minimum registered capital requirements. In addition, minimum
registered capital requirements and minimum foreign shareholding
ratios for companies limited by shares have been cancelled
Foreign-invested Chinese holding companies can now be
established as a limited liability company or a company limited by
shares, while a capital verification report is no longer a
prerequisite for incorporation. Furthermore, the Decision annuls
minimum registered capital requirements and limitations on the
duration of full capital contributions for foreign-invested Chinese
holding companies. Although requirements concerning the total asset
size and investment scale of foreign direct investors remain
unchanged, the new measures are likely to make it easier for
medium-sized company groups to establish holding structures in
Finally, the Decision removes the limitation on the size of
equity investments by foreign-invested enterprises. From now on,
foreign-invested enterprises are allowed to make equity investments
with an accumulated size exceeding 70% of their own registered
capital. In addition, foreign-invested enterprises are now allowed
to carry out domestic reinvestments irrespective of their capital
contribution status and total size of assets.
The decree is the latest in a series of regulatory efforts to
standardise China's foreign investment regulatory regime in
line with prevailing international practice. The removal of minimum
registered capital requirements and investment size limitations for
certain foreign-invested enterprises ensures that foreign investors
enjoy greater flexibility in structuring capitalisations and equity
investments according to their preferences. Although the old
registered capital requirements for foreign-invested companies in
China still await further legislative action, the changes recently
introduced can be seen as another step in the right direction.
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.
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