( Corporate and Investment )
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Foreign Investors can make a retail or wholesale business solely after Dec.11
The Ministry of Commerce promulgated Measures on Administration of Foreign Investment in Commercial Areas on Apr. 16, 2004, which came into force on June 1 the same year. The Measures are at least attractive to foreign investors in the following aspects:
I. Since Dec.11, 2004, the establishment of foreign wholly owned commercial Enterprises is allowed. Since Dec. 11, the commercial areas of China is all-around open to foreign investors, all the limitations, including the region limit and the share control limit, will be lifted up.
II. The threshold for the establishment of a foreign commercial enterprise has been lowed. Compared to Interim Measures Governing the Establishment of Chinese-Foreign Equity Joint Foreign Trade Corporations, the Measures only regulates that the registered capital for establishing a foreign commercial company shall be in line with the Company Law (wholesale company: 500,000RMB; retail company: 300,000RMB). Furthermore, there are no requirements on the qualification of the investors in the Measures.
III. Can an investment company by foreign investment do business in commercial area?
As for this concerned issue, the Ministry of Commerce promulgated amended Provisions on Establishment of Investment Corporation by Foreign Investment on Nov. 17, 2004 (to be effect from Dec. 17), which states that the investment companies shall do the agency, wholesale, retail, and franchise business in accordance with the Measures and change the business scope.
However, the Measures still leave several uncertainties concerning foreign investors' doing commercial business.
1. How can established foreign wholly owned manufacturing companies do commercial business?
According to Measures, the foreign investment companies other than foreign investment commercial companies shall do the agency, wholesale, retail, and franchise business in accordance with the Measures and change the business scope. However, according to the Notice on Several Issues concerning Registration for Records of Foreign Trade Rights of Foreign Investment Companies which is promulgated on Aug. 17, 2004, to add the import and export trading business into the approved business scope, the foreign investment companies shall register them for records, but it will state on the registration form that no distribution of importing products is allowed. This is quite inconvenient and worthless to foreign investors. How to harmonize these regulations?
2. Can foreign wholly owned trading companies who were established in free trade zone do commercial business directly?
The foreign wholly owned trading companies who were established in free trade zone can do commercial business inside the free trade zone or do import or export business with overseas companies, but can they do import or export business beyond the zone directly after Dec. 11?There are no definite answers to the above questions, but it is sure that the concerned authorities will promulgate relevant regulations to reply for these uncertainties.