Foreign Investment Regime in China

Investing in a business in the PRC requires an indepth understanding of the country’s FDI regime, as well as legislation regulating foreign investment in the PRC. Starting a business in China also involves staying updated on the latest legislative developments, and more specifically, legislative acts prohibiting or restricting FDI in the PRC. 

China: What Industries Can Foreign Investors Invest in?

Being essentially a blacklist identifying industries where foreign investment is forbidden, the Negative List has been in effect since 2019.

The document also contains a list of industries where foreign investment is restricted, and not prohibited. Investing in a Chinese business in such industries requires getting permission of respective regulatory authorities.

If one were to compare the 2018 version of the list with the 2019 one, they’d see that the number of banned industries has been significantly reduced. What this means is that the Chinese government is giving foreign investors greater freedom by gradually lifting some of the previously enforced restrictions.

China: Incentives for Foreign Investors

One of the key sectors where FDI has been on the increase lately is manufacturing. To further promote investment in it, the Chinese government has come up with a number of incentives, such as tax breaks and preferential treatment of foreign investors in the context of acquiring land-use rights for industrial projects.

China: Regulation of Foreign Investment

The most important laws regulating foreign investments in the PRC are:

• The FIA;
• The Company Law;
• The BPA;
• Temporary regulations on the establishment of JSCs with foreign investment;
• Interim measures for establishing FIEs in the PRC;
• Administrative measures for approving & registering FDI projects in the PRC.

Purchasing a ready-made company in the PRC requires foreign investors to be intimately familiar with a set of laws & regulations relating to concluding M&A deals in the PRC. The said laws & regulations are quite numerous & complex, which is why the best way to handle this situation would be to hire a team of experienced legal consultants capable of confidently navigating through an M&A landscape in the PRC.