Written by Elaine Lo, Partner of Johnson Stokes & Master (11 Apr 2003)
The State Administration of Press and Publishing ("SAPP") and the Ministry of Foreign Trade and Economic Co-operation ("MOFTEC") jointly promulgated the Measures for the Administration of Foreign-Invested Enterprises for distributing Books, Newspapers and Periodicals ("Publications Measures") on 17 March 2003, which set out the regulatory framework for the establishment of foreign-invested enterprises ("FIEs") to conduct wholesaling and retailing of books, newspapers, magazines and periodicals. The Publications Measures will become effective on 1 May 2003.
1. Methods of Making Investments in the Publications Distribution Sector
The Publications Measures permit FIEs, engaged in the wholesaling and retailing of books, newspapers and periodicals, to be established in the form of an equity joint venture, co-operative joint venture or wholly foreign-owned enterprise. It is also possible for foreign investors to acquire shares in PRC domestic publications distribution enterprises, thereby converting such enterprises to FIEs.
However, the Publications Measures will not apply to the establishment of FIEs for conducting wholesale distribution of publications prior to 1 December 2004, as foreign-invested wholesaling enterprises to distribute publications can only be established after 1 December 2004.
2. Qualifications and Criteria
The Publications Measures lay down certain criteria for the establishment of FIEs to engage in the distribution of publications. These are:
(a) both the Chinese and foreign investors must have the capability to engage in distribution of books, newspapers and periodicals, and have no record of illegal operations during the preceding 3-year period;
(b) the legal representative or general manager of the FIE must possess the relevant professional qualification certificate (medium level or above) in the publications distribution business, and the sales personnel of the FIE should possess the relevant professional qualification certificates (primary level or above) in the publications distribution business;
(c) the FIE should have a permanent place of operation which, in the case of an FIE established to engage in wholesaling of publications, should be not less than 50 square meters. If the publications wholesaling FIE's business premises are independent, then such premises should have an area of not less than 500 square meters;
(d) the registered capital of an FIE engaged in wholesaling of publications shall be not less than RMB30 million, while that of an FIE engaged in retailing of publications shall be not less than RMB5 million;
(e) the term of operation of the FIE cannot exceed 30 years.
3. Approval Procedures
The establishment of an FIE, or the purchase of shares by foreign investors in PRC publications distribution enterprises, is required to be approved, first, by SAPP, and secondly, by MOFTEC (now replaced by the Ministry of Commerce). SAPP is in charge of approving the project proposal, feasibility study, the qualifications of the Chinese and foreign investors, the asset appraisal report and other relevant documents. After SAPP's approval has been obtained, the joint venture contract, articles of association and name list of directors of the FIE, together with the approval document issued by SAPP, should then be submitted to MOFTEC for approval.
Once MOFTEC's approval is granted, the applicant is required to apply to the local State Press and Publishing Agency for a "Publications Operating Permit" by presenting the Certificate of Approval issued by MOFTEC.
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